2023-06-14 21:56:39
Crude oil futures closed lower on Wednesday (14th) following U.S. official data showed an overall increase in oil supply last week, as a revision to the data led to an increase in crude inventories of nearly 8 million barrels.
Oil prices extended losses and settled near session lows following the US Federal Reserve (Fed) left benchmark interest rates unchanged, but indicated that the rate hike cycle was not over yet.
energy commodity prices
- West Texas Intermediate (WTI) crude futures for July delivery fell $1.15, or 1.7%, to $68.27 a barrel, following hitting an intraday high of more than $70.
- delivered in augustBrent Crude Oil (Brent) futures fell $1.09, or 1.5%, to $73.20 a barrel.
- Gasoline futures for July delivery fell 0.1% to settle at $2.55 a gallon.
- delivered in julyHot Fuel FuturesPrices fell 1.6 percent to $2.36 a gallon.
- Natural gas futures for July delivery rose 0.1% to settle at $2.34 per million Btu. .
supply data
The U.S. Energy Information Administration (EIA) announced on Wednesday that U.S. commercial crude oil inventories rose by 7.9 million barrels last week (ending June 9).
According to the S&P Global Commodity Insights survey, analysts on average expected U.S. commercial crude oil inventories to be unchanged last week. The American Petroleum Institute (API) announced on Tuesday night that US crude oil inventories rose by 1 million barrels last week.
Separately, a net release of 1.9 million barrels from the Strategic Petroleum Reserve (SPR) “only exacerbated the build in crude inventories,” said Matt Smith, chief Americas oil analyst at Kpler.
Meanwhile, crude inventories at Cushing, Oklahoma, the Nymex delivery hub, rose by 1.5 million barrels last week, the EIA said.
However, the EIA data included an increase of 1.93 million barrels per day of oil supply last week, which means that for the week, oil inventories rose by regarding 13.56 million barrels.
“Another huge adjustment factor is that the EIA added 13.56 million barrels to the supply deficit last week, which appears to be the result of the EIA underestimating production and overestimating crude exports and potential refining activity,” Smith said.
As for petroleum product inventories, the EIA report showed gasoline and distillate inventories both rose by 2.1 million barrels last week. Analysts had expected gasoline inventories to rise by 460,000 barrels and distillates by 1 million barrels last week.
There was no sharp sell-off in energy prices on Wednesday following inventories across the energy complex rose, which Tariq Zahir, managing member of Tyche Capital Advisors, said might be because Saudi Arabia had agreed to cut its oil output in July and the U.S. government planned to cut oil output. Covering the SPR, and Atlantic hurricanes might disrupt supply.
other market drivers
The International Energy Agency (IEA) on Wednesday revised up its forecast for oil supply this year by 200,000 barrels per day to 101.3 million barrels per day, and forecast an increase of 1 million barrels per day in 2024. Still, the IEA expects that supply will struggle to keep up with demand in the short term, leading to a sharp tightening of the oil market and possibly pushing up prices.
The IEA expects that with the popularization of electric vehicles and the rapid transformation of developed countries to cleaner energy sources, the growth of crude oil demand will slow down sharply within 5 years and peak before 2030.
Meanwhile, the Fed kept its benchmark interest rate unchanged. Since March 2022, following a series of uninterrupted rate hikes by the Fed, the federal funds rate has risen from a level close to zero to the current range of 5% to 5.25%, finally ushering in a pause in rate hikes.
“The Fed’s pause in its rate hike cycle is helping to fuel risk appetite and might encourage oil speculators to return to the market,” said Troy Vincent, senior market analyst at DTN.
“But since the debt ceiling is raised, the U.S. Treasury may issue a lot of debt at the same time, which might drive the dollar higher and create further headwinds for oil prices,” he said.
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