Crude Stocks Decline, Oil Prices Rise; Panmure Gordon Warns Of Bearish Headwinds

Meanwhile, OPEC members ruin the cartel's goal of cutting output: File Image/Pixabay

A week after crude trading was influenced by unexpected U.S. stockpile gains that caused investors to worry about waning demand, oil prices on Wednesday climbed after the latest  inventory numbers showed a larger-than-expected draw.

Brent settled up $1.10 at $87.34 per barrel, while West Texas Intermediate settled up $1.07 at $83.88.

According to the Energy Information Administration, oil in storage declined by 12.2 million barrels last week compared to expectations for a 680,000 barrel draw.

Matt Smith, lead oil analyst at Kpler, pointed out that "Both gasoline and distillates also showed draws despite higher refinery runs, with implied demand higher for both—particularly for gasoline—as gas stations stocked up ahead of the Independence Day holiday weekend."

The other support for crude, Hurricane Beryl, softened after the U.S. National Hurricane Center said the storm was expected  to weaken when it entered the Gulf of Mexico this week; however, analysts kept the concern alive by stating it could still disrupt Mexico's offshore oil production.

The notable exception was Helima Croft, global head of commodity strategy at RBC Capital Markets, who said, "We used to think about hurricanes as unquestionably a potential bullish near-term development for oil markets, now the picture is not so clear," referring to the fact that the U.S. is no longer as dependent on offshore oil production and refinery shutdowns could be a bearish event by restricting demand.

Capping Wednesday's gains was the Organization of the Petroleum Exporting Countries (OPEC), which was reportedly responsible for a second consecutive monthly rise in output (up 70,000 barrels per day to 26.70 million bpd) with members Nigeria and Iran offsetting the voluntary supply cuts of other members.

This, combined with ongoing reports of a lukewarm economic recovery in China, sent bearish signals throughout the energy market despite the rises posted by Brent and WTI, said Panmure Gordon.