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Futures Movers: Oil prices end higher with U.S. crude supplies down a third straight week

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Oil futures ended higher Wednesday, with prices scoring their longest strength of daily gains so far this month on the heels of a third straight drop in U.S. crude inventories.

“A tick higher in refinery runs and a tick lower in imports has yielded a third consecutive draw to crude inventories — dropping them to their lowest since late January 2020,” said Matthew Smith, director of commodity research at ClipperData, in emailed commentary.

On Wednesday, the Energy Information Administration said U.S. crude inventories fell by 3 million barrels for the week ended Aug. 20.

On average, analysts polled by S&P Global Platts forecast a decline of 3.2 million barrels for crude stocks, while the American Petroleum Institute on Tuesday reported a 1.6 million-barrel decrease.

West Texas Intermediate crude for October delivery
CL00,
+1.41%

CLV21,
+1.41%

rose 82 cents, or 1.2%, to settle at $68.36 a barrel on the New York Mercantile Exchange. Front-month contract prices ended at their highest since Aug. 13, according to Dow Jones Market Data.

October Brent crude
BRN00,
+0.17%

BRNV21,
+0.17%
,
the global benchmark, added $1.20, or 1.7%, at $72.25 a barrel on ICE Futures Europe, the highest finish since Aug. 3.

Prices for WTI and Brent crude notched a third straight gain, the longest streak of daily gains since the three-session rise ended on July 30, FactSet data show.

The EIA also reported a weekly inventory fall of 2.2 million barrels for gasoline, while distillate stockpiles rose by 600,000 barrels. The S&P Global Platts survey forecast supply declines of 1.5 million barrels for gasoline and 400,000 barrels for distillates.

“Gasoline inventories have drawn as implied demand has rebounded, perhaps the last hurrah of summer driving season,” said Smith. Distillates showed “a minor build amid a tick lower in implied demand.” 

The EIA report pegged last week’s amount of finished motor gasoline supplied, a proxy for demand, at nearly 9.6 million barrels, up from 9.3 million barrels a week before.

On Nymex, September gasoline
RBU21,
+5.44%

added 5.5% to $2.30 a gallon, the largest daily percentage rise sine January. September heating oil
HOU21,
+2.59%

tacked on 2.5% to $2.12 a gallon.

Crude stocks at the Cushing, Okla., storage hub edged up by 100,000 barrels for the week, while total U.S. petroleum supplies was unchanged for the week at 11.4 million barrels per day, according to Wednesday’s EIA data.

News emerging in the Middle East may also influence oil prices.

Phil Flynn, senior market analyst at The Price Futures Group, said that according to reports, the U.S. is ready to make “tough concessions” in return for Iran’s retreat from its nuclear program. Negotiations between Iran and global powers to restore a 2015 nuclear deal, under which the U.S. lifted sanctions on Iran in return for Tehran’s agreement to limit nuclear activities, stalled a few months ago. The U.S. decided to withdraw from the agreement in 2018.

Meanwhile, Israel’s military is accelerating its operational plans against Iran due to the progress of the Islamic Republic’s nuclear program, Israel Defense Forces Chief of Staff Lt.-Gen. Aviv Kohavi has warned, according to The Jerusalem Post.

That’s just a rumor for now, but could “give a bid to crude [prices] if it plays out,” said Tariq Zahir, managing member at Tyche Capital Advisors.

Voice of America reported Tuesday that Israeli Prime Minister Naftali Bennett will likely urge U.S. President Joe Biden to take a hard-line stance on Iran when the leaders meet on Thursday.

On the bearish side for oil, “we will hear from Jackson Hole regarding tapering, and this could start a risk off posture, especially since we are seeing bond yields inch higher today,” said Zahir, suggesting that may put pressure on oil prices.

Natural-gas futures, meanwhile, ended virtually unchanged with the September contract
NGU21,
+0.46%

at $3.90 per million British thermal units, ahead of Thursday’s weekly EIA update on domestic supplies of the fuel.

Traders are watching disturbances in the Atlantic for potential disruptions to oil and natural-gas operations in the Gulf of Mexico. One of the disturbances is expected to strengthen and may move into the western Gulf of Mexico by Sunday, according to the National Hurricane Center.

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