Oil prices headed lower on Wednesday, with gasoline futures leading the losses in the sector as traders parsed U.S. government data showing a more-than-3-million-barrel decline in crude inventories, and a bigger-than-expected climb in gasoline inventories.
Weekly gasoline demand was “disappointing as drivers may be resistant to higher prices,” said Phil Flynn, senior market analyst at The Price Futures Group.
The Energy Information Administration reported Wednesday that total finished motor gasoline supplied for the week ended April 2, which is a gauge for demand, was at 8.78 million barrels per day, down from 8.89 million barrels per day a week earlier.
“Still, the draw on crude should start a string of bigger draws in weeks to come, so we may see some buying come back in,” Flynn told MarketWatch.
U.S. crude inventories fell by 3.5 million barrels for the week ended April 2, according to the EIA. IHS Markit had forecast a decline of 700,000 barrels, while the American Petroleum Institute on Tuesday reported a 2.6 million-barrel decrease.
West Texas Intermediate crude for May delivery CL.1,
The EIA data also reported that crude stocks at the Cushing, Okla., storage hub declined by 800,000 barrels for the week, while total domestic oil production stood at 10.9 million barrels a day, down from 11.1 million barrels a day.
The government agency said the latest domestic crude-oil production estimate “incorporates a re-benchmarking that lowered estimated volumes by 92,000 barrels per day, which is about 0.8% of this week’s estimated production total.” It explained that it may “re-benchmark” the weekly production estimate if there is a “large difference” in data presented in two of its monthly reports.
Meanwhile, the EIA said gasoline supply was up by 4 million barrels, while distillate stockpiles climbed 1.5 million barrels for the week. IHS Markit forecast weekly supply increases of 200,000 barrels for gasoline and 500,000 barrels for distillates.
On Nymex, gasoline futures led the percentage losses with the May contract RBK21,
Oil has traded within a narrow range for the past 2 1/2 weeks as traders weigh signs of a strengthening U.S. economic recovery against prolonged business and consumer lockdowns across the eurozone, said Fawad Razaqzada, market analyst at ThinkMarkets, in a note.
Demand for oil should pick up as lockdowns are slowly removed and more countries ease travel restrictions, while the rollout of vaccines still promises an end to the pandemic, he said. The concern, however, is that the rise in demand will be offset by rising oil supply as the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed last week to begin easing output curbs, while indirect talks between the U.S. and Iran could see sanctions against Tehran eventually lifted.
See: What the Iran nuclear talks mean for oil prices
“So, I can’t see oil prices rising significantly further. Brent has already struggled to stay above $70 and WTI couldn’t stay above $65 for long,” Razaqzada wrote. “These will remain the key resistance levels going forward, and should prices rise again, I can’t see them holding above these levels for too long in 2021.”
