RE:API Oil futures settled lower on Wednesday after official U.S. data revealed across-the-board weekly increases in petroleum supplies, with an “adjustment” to the data contributing to a nearly 8 million-barrel rise in crude stockpiles.
Prices for oil extended their decline to settle near the session’s lows after the Federal Reserve announced a decision to hold its benchmark interest rate steady, but indicated that its not done with its rate-hiking cycle.
Price action
West Texas Intermediate crude for July delivery CL00, -0.37% (https://www.marketwatch.com/investing/future/CL00?mod=MW_story_quote) CL.1, -1.17% (https://www.marketwatch.com/investing/future/CL.1?mod=MW_story_quote) CLN23, -1.17% (https://www.marketwatch.com/investing/future/CLN23?mod=MW_story_quote) fell $1.15, or 1.7%, to settle at $68.27 a barrel on the New York Mercantile Exchange after touching intraday highs above $70.
August Brent crude BRN00, -0.63% (https://www.marketwatch.com/investing/future/BRN00?countryCode=UK&mod=MW_story_quote) BRNQ23, -0.63% (https://www.marketwatch.com/investing/future/BRNQ23?countryCode=UK&mod=MW_story_quote), the global benchmark, shed $1.09, or 1.5%, to $73.20 a barrel on ICE Futures Europe.
Back on Nymex, July gasoline RBN23, -0.36% (https://www.marketwatch.com/investing/future/RBN23?mod=MW_story_quote) lost 0.1% to $2.55 a gallon, while July heating oil HON23, -0.35% (https://www.marketwatch.com/investing/future/HON23?mod=MW_story_quote) fell 1.6% to $2.36 a gallon.
July natural gas NGN23, 0.08% (https://www.marketwatch.com/investing/future/NGN23?mod=MW_story_quote) added 0.1% at $2.34 per million British thermal units.
Supply data
The Energy Information Administration on Wednesday reported that U.S. commercial crude inventories rose by 7.9 million barrels for the week ended June 9.
On average, analysts polled by S&P Global Commodity Insights expected crude stocks to be unchanged for the week. The American Petroleum Institute, an industry trade group, late Tuesday reported that U.S. crude inventories rose by one million barrels last week, according to a source citing the data.
Another net Strategic Petroleum Reserve release of 1.9 million barrels “has only exacerbated the crude build,” said Matt Smith, lead oil analyst, Americas, at Kpler.
Crude stocks at the Cushing, Okla., Nymex delivery hub, meanwhile, climbed by 1.5 million barrels for the week, the EIA said.
The EIA data, however, included an upward adjustment of 1.937 million barrels a day to petroleum supplies (see line 13 in EIA data tables) (https://ir.eia.gov/wpsr/overview.pdf). Multiplied by 7 days, that’s about 13.56 million barrels added to petroleum stockpiles.
Read archived story on what these EIA ‘adjustment’s in the weekly U.S. oil supply data tables are all about (https://www.marketwatch.com/story/what-are-these-eia-adjustments-in-the-weekly-u-s-oil-supply-data-tables-all-about-31d580e8)
“Another whopper of an adjustment factor, with the EIA adding back in 13.56 million barrels of missing supply, appears the result of the EIA underestimating production and overestimating crude exports, and potentially refining activity too,” said Smith.
As for product inventories, the EIA report showed weekly inventory increases of 2.1 million barrels each for gasoline and distillates. Analysts had forecast weekly climbs of 460,000 barrels for gasoline and 1 million barrels for distillates.
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Energy prices Wednesday didn’t see a major selloff in the wake of the builds across the energy complex, and that’s likely because Saudi Arabia has agreed to cut its oil production in July (https://www.marketwatch.com/story/saudi-arabias-planned-oil-cut-could-lead-to-cracks-within-opec-but-not-a-spike-in-gasoline-prices-fafcd443?mod=commodities-corner&mod=article_inline), the U.S. government has plans to replenish the SPR (https://www.marketwatch.com/story/u-s-energy-department-says-itll-buy-another-3-1-million-barrels-of-oil-for-the-spr-27e225a0?mod=article_inline), and Atlantic hurricane season has the potential to disrupt supplies, said Tariq Zahir, managing member at Tyche Capital Advisors.
Other market drivers
On Wednesday, the Paris-based International Energy Agency on Wednesday raised its 2023 oil supply forecasts by 200,000 barrels a day to 101.3 million barrels a day and said it expects further supply growth o
f 1 million barrels a day in 2024.
Still, supplies are expected to struggle to keep pace with demand at least in the near term, the IEA expects, a situation that will sharply tighten the oil market and could send prices higher.
The IEA forecast growth in demand for crude oil to slow sharply within five years and peak before the end of the decade, as electric-vehicle uptake surges and developed nations rapidly transition to cleaner sources of energy.
See:
Oil demand to peak this decade as electric-vehicle uptake accelerates, IEA says (https://www.marketwatch.com/story/oil-demand-to-peak-this-decade-as-electric-vehicle-uptake-accelerates-iea-says-447f2891)
Meanwhile, the
Fed left its benchmark interest rate unchanged (https://www.marketwatch.com/story/fed-skips-june-rate-rise-points-to-two-more-25-basis-point-interest-rate-hikes-this-year-92115113)
, pausing after a nonstop series of increases that lifted the fed-funds rate from near zero to its current level of 5% to 5.25% since March 2022.
“A pause in the Fed’s rate hiking cycle may help incite a broadening risk appetite that could encourage oil speculators to wade back into the market,” Troy Vincent, senior market analyst at DTN, told MarketWatch, ahead of the Fed decision.
“But with an expectation of this coinciding with the U.S. Treasury department issuing massive amounts of debt to refill the general account following the debt ceiling deal, this could propel the U.S. dollar higher and cause further headwinds to oil prices,” he said.