Oil futures traded lower on Wednesday, but pared some of their losses after U.S. data revealed across-the-board declines in domestic petroleum inventories.
Traders also continued to weigh the prospects for a return of Iranian supply.
“A full house of draws from this week’s inventory report is trying to support prices,” said Matt Smith, director of commodity research, at ClipperData.
” Crude inventories saw a modest draw, helped by ongoing strength in exports, a tick higher in refining activity, and a dip in imports,” he said in emailed commentary. “Higher implied demand for both gasoline and distillates encouraged a draw to both.”
Nonetheless, “refinery runs still lag the pace seen in mid-May 2019 by more than 1.5 million barrels per day,” said Smith, even as total product supplied only lag by less than 200,000 bpd and gasoline supplied by only 76,000 bpd. That points to “higher runs ahead, especially given current elevated refinery margins.”
The Energy Information Administration reported Wednesday that U.S. crude inventories fell by 1.7 million barrels for the week ended May 21.
On average, analysts polled by S&P Global Platts forecast a decline of 2.2 million barrels for crude stocks, while the American Petroleum Institute on Tuesday reported a 439,000-barrel decline.
West Texas Intermediate crude for July delivery CL00,
Front-month July Brent crude BRNN21,
The EIA also reported that gasoline supply also declined by 1.7 million barrels, while distillate stockpiles fell by 3 million barrels for the week. The S&P Global Platts survey had expected weekly supply declines of 700,000 barrels for gasoline and 1.6 million barrels for distillates.
On Nymex, June gasoline RBM21,
The EIA data also showed crude stocks at the Cushing, Okla., storage hub edged down by 1 million barrels for the week.
Despite the latest U.S. supply declines, prices have so far been able to completely shake off their losses on Wednesday.
“The potential for a return of Iranian oil supply into the market has been keeping oil prices from gaining further,” said Warren Patterson, head of commodities strategy at ING, in a note.
“On the positive side, physical demand has been improving in both Europe and the U.S. as a slowdown in new COVID cases has been pushing up mobility,” he wrote. “The start of the summer driving season in the U.S. from next week onwards could further support crude oil demand in the country.”
India, the world’s third-largest oil consumer, has also seen a slowdown in the rate of new coronavirus cases in recent weeks, which could lead to an easing of mobility restrictions next month, Patterson said.
Rounding out moves in the energy futures market, the June natural-gas contract NGM21,
