Oil prices climbed Wednesday, on track to score their highest finish of the month, after a U.S. government report showed that domestic crude supplies fell more than expected last week.
October West Texas Intermediate crude on the New York Mercantile Exchange CLV8, +0.99% the U.S. oil benchmark, tacked on 47 cents, or 0.7%, at $69.01 a barrel. The global benchmark October Brent crude LCOV8, +0.67% traded 59 cents, or 0.8%, higher at $76.54 a barrel on ICE Futures Europe. Both contracts were set to mark their highest settlements this month to date.
The Energy Information Administration reported Wednesday that domestic crude supplies declined by 2.6 million barrels for the week ended Aug. 24. Analysts surveyed by S&P Global Platts had forecast a fall of 1 million barrels, while the American Petroleum Institute on Tuesday reported a modest rise 38,000 barrels, according to sources.
The “crude numbers ... definitely have a slight bullish tilt to them,” said Tariq Zahir, managing member at Tyche Capital Advisors. “With a bigger draw than expected in crude oil and gasoline, we could see crude remain supported.”
However, if the market sees “some U.S. dollar strength, coupled with the build in Cushing,[Okla.] and the fact we will be going into refinery maintenance season and U.S. driving season coming to a close ... we could see spot prices pair their gains as the day goes on,” he told MarketWatch.
Read: Gas prices are set to drop as summer driving season ends
Gasoline stockpiles fell 1.6 million barrels for the week, while distillate stockpiles shed 800,000 barrels, according to the EIA. The S&P Global Platts survey forecast a supply decrease of 160,000 barrels for gasoline, along with a climb of 1.7 million barrels for distillate stocks.
Analysts polled by S&P Global Platts expected a decline of 1 million barrels, while the American Petroleum Institute late Tuesday reported a slight rise of 38,000 barrels for last week.
On Nymex, September gasoline RBU8, +0.25% traded nearly flat at $2.08 a gallon, while September heating oil HOU8, +0.76% added a penny, or 0.5%, to $2.222 a gallon. The September contracts for the products expire at Friday’s settlement.
The weaker tone for WTI oil overnight in electronic trading was attributed in part to reports late Tuesday that embattled Venezuela’s state-run oil firm signed a potential major investment agreement valued at $430 million to increase production by 640,000 barrels a day.
Reuters reported that Venezuelan state-run oil firm PDVSA signed the investment agreement to increase production at 14 oil fields. However, some industry participants were skeptical that the investment would go through, given the country’s economic woes, according to the report, which didn’t specify the origin of the investment in PDVSA.
U.S. sanctions on Iran and supply disruptions in Libya and Venezuela have supported oil prices lately, amid data showing growing output from major producers such as Saudi Arabia (a member of the Organization of the Petroleum Exporting Countries) and non-OPEC producer Russia. U.S. sanctions on oil exports go into effect in November, with investors estimating more than 1 million barrels a day will be taken off line.
The Wall Street Journal reported on Tuesday that oil exports from Iran are already declining even before crude sanctions officially kick in Nov. 4. The report, citing people familiar with the situation, said an unexpected drop in oil shipments could pose a supply risk for global markets, with the state-run National Iranian Oil Co. provisionally expecting crude shipments next month to drop to about 1.5 million barrels a day, down from about 2.3 million barrels a day in June.
President Donald Trump’s decision in May to pull the U.S. out of a 2015 international agreement to curb Iran’s nuclear program set the stage for the reimposition of economic sanctions on the Islamic Republic.
Rounding out trading on Nymex, September natural gas NGU18, +0.11% shed 0.2% to $2.846 per million British thermal units, with the contract due to expire at the settlement. The most-active October contract NGV18, +0.04% was down 0.3% at $2.838.
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