WTI crude oil futures held around $73 per barrel on Wednesday after declining for three straight sessions, weighed down by an unexpected rise in US crude inventories. API data showed that US crude oil inventories increased by 0.347 million barrels for the week ending August 20th, defying market forecasts of a 2.8 million barrel decline and marking the second build in the last eight weeks. Additionally, markets continued to monitor progress in the Middle East after Israel accepted a proposal to tackle disagreements blocking a ceasefire deal in Gaza eased supply concerns. However, an agreement between Israel and Hamas remains elusive. China’s economic weakness also continued to weigh on the demand outlook. Investors are closely watching the release of the FOMC minutes later today for more clues on the US Federal Reserve's next policy move.
Heating oil futures in the US declined to below $2.27 per gallon, the lowest level since late-December of 2021, tracking lower oil prices as global oil supply concerns eased.China's recent economic data has been disappointing, with slowing growth, falling home prices, and rising unemployment. This has led Chinese refineries to cut back on crude processing, further dampening demand. The latest EIA report showed a 1.357 million barrel build in crude oil inventories for the week ending August 9th, countering API's findings and alleviating supply fears amid rising geopolitical tensions in the Middle East and the Gulf of Mexico’s hurricane season. Meanwhile, heating oil stockpiles fell by 0.268 million barrels, and distillate stocks decreased by 1.673 million barrels, nearly double the expected draw, limiting the heating commodity’s decline.
US natural gas prices are below $2.2/MMBtu, nearly 30% off June's peak, due to a supply surplus despite high summer demand. Warm winters reduced heating needs, leading to excess inventory, which further drove prices down. Major producers like EQT and Coterra Energy are cutting output and delaying projects to manage the surplus. Although storage levels are 13% above the five-year average, up from a 40% surplus in March, analysts expect lower consumer prices this winter due to strategic stockpiling. Producers are adapting by reducing production, with rigs dropping from over 120 in February to 98 last week, aiming to stabilize the market.
Gasoline futures in the US dropped to $2.25 per gallon, hitting a seven-month low amid an outlook of lower demand. Additionally, US crude oil stocks unexpectedly rose in the week ending August 9th, countering a sharper-than-expected 3 million barrel decline in gasoline inventories. Also on the supply side, hopes of a ceasefire in the Middle East trimmed the risk premium in energy commodities, contributing to lower prices.
