Big Inventory Draws Boost Crude Prices Despite Demand Fears

Also, energy executives vow to increase output at sustained $50 oil: File Image/PixaBay

More evidence contradicting worries that rising Civid infections and restrictions are impacting oil demand arrived on Wednesday in the form of Energy Information Administration data showing substantial declines in crude, gasoline and distillate stocks; as a result, the commodity posted another session of modest gains.

Brent rose 5 cents to settle at $41.77 per barrel, while West Texas Intermediate gained 13 cents to settle at $39.93 per barrel.

The IEA reported that while crude inventories dropped by a less than forecast 1.6 million barrels, gasoline stocks dropped more than expected, sliding by 4 million barrels, and distillate stockpiles posted a surprise drawdown of 3.4 million barrels.

As for diesel stockpiles, they enjoyed their biggest reductions since governments ground the world's economy to a halt earlier this year (although the actual level still remains at 30 year highs).

Phil Flynn, senior market analyst at Price Futures Group Inc., said, "Everything came in more bullish, or with bigger draws, than expected across the board," adding that the resulting modest crude price gains were likely because traders attributed some of the drawdowns to ongoing storm activity.

Also, despite the impact of the Covid-mandated lockdowns and worries about rising infection rates, a Federal Reserve Bank of Dallas survey released Wednesday revealed that about 43 percent of respondents expect the U.S. oil rig count to rise "substantially" if WTI rises to between $51 and $55 per barrel.

One unidentified respondent said in the report, "Sustained prices of $50 per barrel would kick things off again."

Also exhibiting determination to move ahead in its economic recovery on Wednesday was China, the level of whose diesel exports in August doubled compared to July to 1.09 million tonnes, as refiners shipped the fuel overseas despite poor export margins to reduce brimming domestic oil product inventories.

On the vaccine front, final phase trials began on Wednesday in the U.S. for Johnson & Johnson's  single-dosage candidate, making this the fourth company to hurtle toward possible regulatory approval in that country