Oil Prices Rise Amid Falling U.S. Stocks

By Arathy Somasekhar

HOUSTON (Reuters) – Oil prices settled higher on Wednesday, supported by significant declines in U.S. crude and fuel stocks, but remained close to their lowest level in six weeks
because of concerns over weak global demand.

Prices ended a three-session decline as U.S. crude and fuel inventories fell and risks to oil supply grew due to wildfires in Canada.

Brent crude futures for September closed 70 cents, or 0.9%, higher at $81.71 a barrel. U.S. West Texas Intermediate crude for September increased by 63 cents, or 0.8%, to $77.59 per barrel.

According to the Energy Information Administration, U.S. crude inventories fell by 3.7 million barrels last week, contrasting with analysts’ expectations of a 1.6 million-barrel drop.

U.S. gasoline stocks dropped by 5.6 million barrels, far exceeding expectations for a 400,000 barrel reduction. Distillate stockpiles, which include diesel and heating oil, declined by 2.8 million barrels compared to expectations of a 250,000-barrel increase, EIA data revealed.

“Demand is better than anticipated,” said Bob Yawger, director of energy futures at Mizuho in New York. “As long as gasoline is doing well, that will support the rest of the market into the short-term future. Higher distillate demand was the icing on the cake,” Yawger added.

However, the market remains cautious about global summer demand. U.S. oil refiners are expected to report sharply lower second-quarter earnings compared to last year, as the lackluster summer driving season weakened refining margins, according to energy analysts.

Prices face pressure from ceasefire talks between Israel and Hamas, and ongoing concerns that China’s economic slowdown, the world’s largest crude importer, will weaken global oil demand.

Crude deliveries to India, the third-largest oil importer and consumer, also dropped in June to the lowest level since February, according to government data.

WTI lost 7% over the previous three sessions, while Brent declined nearly 5%.

Supporting prices, Canadian wildfires have led some producers to cut back on production, threatening a significant amount of supply. Imperial Oil has reduced non-essential staff at its Kearl oil sands site as a precaution.

Meanwhile, Russia’s energy ministry has committed to adhering to the crude-output quota set by the OPEC+ group in July, following June production that exceeded the established limits.