Oil Jumps Inexplicably On Mixed U.S. Inventory Report, As Rate Cut Hopes Intensify

A big gasoline build deflates expectations for a robust summer driving season: File Image/Pixabay

Oil trading on Wednesday cemented its reputation for being pushed and pulled due to conflicting demand signs; this time a bigger than expected U.S. stockpile drawdown caused  prices to escalate on Wednesday.

However, gasoline inventories rose the most since January, putting into question the resilience of the highly-anticipated summer driving season in that country.

As of 1733 GMT, West Texas Intermediate settled up $2.09 at $82.85 per barrel, while Brent rose $1.35 to $85.08.

The Energy Information Administration disclosed that 4.9 million barrels of crude had been drawn from storage during the week ended July 12 compared to an expected 30,000-barrel decline; as for gasoline stocks, they increased 3.3 million barrels in the week ending July 12, with production at 9.5 million barrels daily (gasoline inventories are now slightly over the five-year average for this time of year).

U.S. crude inventories are around 5 percent lower than the five-year average for this time of year.

In middle distillates, an inventory build of 3.5 million barrels for the week to July 5 was reported, with production rising to an average of 5.2 million barrels daily.

This came on the heels of recent data showing  a slowing of growth in the U.S., the euro area, and China, which compelled analysts at Citigroup's Citi Research unit to state in a note that "Central banks are getting closer to a point where they will have scope to cut rates in earnest."

Wednesday also saw reports of countries reducing their crude exports: according to HFI Research, Russia crude exports have fallen from 5 million barrels per day (bpd) in June to below 4 million bpd so far in July, and Saudi Arabia's overseas oil shipments dropped to a 10-month low in June, at around 168 million bpd for the month.

Also on Wednesday came news that the United States Office of Foreign Assets Control has eased some sanctions on Venezuela but retained sanctions on PdVSA; transactions with Petróleos de Venezuela, the state-owned oil and natural gas company in which PdVSA has a 50 percent or greater interest, remain prohibited under the sanctions imposed by various executive orders.

The U.S. maintains that Venezuela president Nicolas Maduro has failed to fully meet the obligations outlined in the electoral roadmap signed with the opposition in October 2023.

Meanwhile in Canada, 47 new new wildfires broke out across Alberta, threatening more than 400,000 bpd of that country's oil production; flames have already cut production at some sites in Fort McMurray.