Oil prices experienced an upward trajectory on Wednesday as U.S. government data revealed a tighter-than-anticipated crude supply. However, gains were limited due to concerns surrounding the Chinese economy.
Brent crude futures for October saw an increase of 37 cents, settling at $85.86 per barrel. The more active November contract, set to expire on Thursday, rose by 33 cents to $85.21. U.S. West Texas Intermediate crude futures rose by 47 cents to reach $81.63.
The prior day had witnessed both benchmarks surging by over a dollar, prompted by a weakened U.S. dollar following soft job data, which lowered the likelihood of further interest rate hikes.
Data from the Energy Information Administration indicated that U.S. crude inventories decreased by 10.6 million barrels in the past week, reaching 422.9 million barrels. Analysts surveyed by Reuters had projected a drop of 3.3 million barrels. Additionally, product supplied of finished motor gasoline, serving as a proxy for demand, hovered around 9.1 million barrels per day.
The potential decline in gasoline demand was acknowledged by John Kilduff, a partner at Again Capital, who stated that such demand typically diminishes after the peak of the summer driving season.
Investors closely monitored Hurricane Idalia, which made landfall as a Category 3 storm in Florida. By midday, it approached southeastern Georgia as a Category 1 storm.
Expectations of Saudi Arabia prolonging its voluntary output cut into October, thereby maintaining tight oil supply, influenced price movement. As a response to this projection, refining sources surveyed by Reuters predicted that Saudi Arabia’s official selling prices for all crude grades sold to Asia in October will reach their highest levels for the year.
However, the oil market faced a potential tightening as a military coup unfolded in Gabon on Wednesday. This event could impact the country’s crude supplies. Kpler ship-tracking data revealed that Gabon exported an average of 160,000 barrels per day to Asia from May to July.
Nonetheless, concerns persisted regarding China’s mixed economic situation, as the world’s largest oil importer. Chinese refiners were expected to increase diesel exports in September to over 1 million metric tons. Traders and analysts attributed this move to lucrative margins for selling overseas and expectations of additional export quotas from Beijing. Andrew Lipow, president at Lipow Oil Associates in Houston, noted that the market’s interpretation is that elevated product exports may reflect a less favorable state of the Chinese economy.
Ole Hansen, head of commodity strategy at Saxo Bank, emphasized that despite production cuts from countries like Saudi Arabia and Russia, other exporters such as Venezuela and Iran continue to contribute, tempering any sustained rise in prices. He mentioned that ongoing demand concerns could hinder prices from exceeding $90.
