Fri, March 29, 2024

Oil Gains on US Stock Draw & Hopes on Economic Recovery

Close up industrial view of oil refining. canola

Crude oil futures extended gains on energy commodities Wednesday. This came after a bigger-than-expected draw in U.S. crude stockpiles. Solid U.S. and Chinese factory activity fired up optimism of a recovery from the pandemic, boosting investor risk appetite.

Brent crude (LCOc1) futures were up 45 cents to $46.03 a barrel as of 0559 GMT.  It’s been on it’s third day of climbing.

U.S. West Texas Intermediate futures (CLc1) gained 43 cents to $43.19. This followed the previous day’s gain of 15 cents.

U.S. crude inventories fell by 6.4 million barrels. That was in the week to Aug. 28 to 501.2 million barrels, according to the American Petroleum Institute (API). These results were against analysts’ expectations for a draw of 1.9 million barrels.

Gasoline stocks also fell by 5.8 million barrels. It was more than analysts’ estimates of a draw of 3.0 million barrels.

Commodities analysts had forecast a sixth weekly drawdown in U.S. crude inventories in a poll.

U.S. manufacturing activity accelerated to over  1-1/2-year high in August amid a surge in new orders. It was lending support to Wall Street and oil markets.

Oil: Hurricane Laura

China’s factory activity also expanded at the fastest clip in nearly a decade in August. It was bolstered by the first increase in new export orders this year.  Manufacturers worked up production to meet rebounding demand, a private survey showed on Tuesday.

There was a slower-than-expected resumption of oil output in the United States. This was after Hurricane Laura raised concerns over tighter supply, said Kazuhiko Saito, chief analyst at Fujitomi Co.

Commodity news reported, U.S. Gulf of Mexico’s offshore oil output fell by 525,099 barrels per day on Tuesday. This is 28.4% of the region’s daily production, the U.S. Department of Interior reported. Energy companies restarted more activity in the aftermath of Hurricane Laura.

Still, 71 of the U.S. Gulf of Mexico’s 643 manned platforms remained evacuated. The regulator said it was down from 117 production platforms on Monday.

On the global supply side, in August, oil output by OPEC rose by about 1 million barrels per day.

From May 1, OPEC and its allies (OPEC+) made a record cut of 9.7 million bpd. That was 10% of global output after the novel coronavirus destroyed one-third of world demand. The cut tapered to 7.7 million bpd from Aug. 1 until December.

The United Arab Emirates pumped 2.693 million bpd in August, which was above its OPEC+ quota. This followed hot weather and people holidaying at home drove associated gas demand for power generation.

Nissan Securities’ Kikukawa said, higher output by the UAE capped gains in oil prices.

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