WTI stabilizes above six-month lows on bullish US inventory report
First-month futures in the U.S. light sweet crude oil benchmark, West Texas Intermediary, or WTI, stabilized just above six-month lows in the upper $80 a barrel on Wednesday, traders in oil ignoring the headwinds of a (mostly) stronger US dollar and weak US stock markets and instead focusing on a bullish weekly report on US oil inventories.
According to the U.S. Energy Information Agency (EIA), in the week ending last Friday, U.S. crude oil inventories fell 7.1 million barrels, a much larger drop than the decline of 275,000 expected by analysts. The decline was partly explained by a further increase in U.S. oil exports, which hit a new record high of 5 million barrels a day last week, the EIA said.
US oil exports have surged lately amid a sharp rise in the WTI-Brent oil discount which is making the latter more attractive to international buyers. WTI’s discount to Brent jumped following Russia’s invasion of Ukraine in February, as European demand for Brent surged as buyers rushed to replace Russian oil exports in anticipation Sanctions.
Another big bright spot from the latest US inventory report was a much bigger than expected drop in gasoline inventories, which fell 4.6 million barrels from consensus bets for a drawdown of 1.1 million. of barrels. Analysts say this is a sign that the recent drop in US fuel prices has started to boost demand.
But the rise in oil markets was capped on Wednesday due to concerns over a potential increase in Russian oil production. According to a Reuters report citing Russian government documents, Russia has started ramping up production to meet demand from Asian buyers and plans to ramp up production through 2025. Traders also continue to watch developers on the front lines. of the Iran nuclear deal, with the EU and US currently considering Iran’s response to a final proposal tabled by the EU to revive the deal earlier this week.
Analysts believe a deal that lifts US sanctions on Iranian exports could bring more than a million barrels back to world markets. Goldman Sachs said in a note on Wednesday that it would have to cut its WTI forecast for 2023 by $5 to $10 from its current level of $125 a barrel if a deal is reached. But most believe that the gaps between the United States and Iran remain too great to overcome.
U.S. natural gas prices narrowly miss yearly highs
U.S. natural gas prices rallied but failed to reach new yearly highs above $9.60 on Wednesday. The price eventually fell just under 2.0% during the session back to $9.10. Elsewhere, dovish Fed minutes were unable to lift gold prices, which fell near $15 to around $1,760, with traders focusing instead on higher numbers. US retail sales stronger than expected for July. Copper prices were choppy in the $3.60 area and last fell around 1.0% on the day.