U.S. crude bounces from 14-week low, amid unexpected gas inventory draw

Commodities

U.S. Crude futures bounced from 14-week lows on Wednesday, as an unexpected draw in gasoline inventories last week helped temporarily ease some concerns related to the prolonged supply glut in global energy markets.

On the New York Mercantile Exchange, WTI crude for September delivery traded between $39.33 and $41.03 a barrel before closing at $40.80, up 1.29 or 3.26% on the session. It came one day after WTI closed below $40 for the first time since mid-April when crude futures took a hit following the collapse of a closely watched Doha Agreement among major producers, including Saudi Arabia and Russia. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $41.58 and $43.28 a barrel, before settling at $43.03, up 1.22 or 2.92% on the day.

Since hitting 2016 yearly highs of $51 a barrel in early-June, U.S. crude futures have slumped by nearly 20% over the last several weeks.

On Wednesday morning, U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that Gasoline Inventories declined by 3.3 million barrels for the week ending on July 29, considerably more than analysts' expectations for a modest 0.2 million draw. Of the declines, stocks in the PADD 1 district covering the majority of the East Coast, fell by 1.2 million barrels for the week. The PADD 1 district, which has been beset by rising stockpiles in recent weeks, has still seen gasoline inventories soar by 11.5 million barrels over the last year.

The drawdown could help assuage some fears of long-term oversupply among gasoline inventories worldwide. According to analysts from Citigroup Inc (NYSE:C), gasoline inventories have soared to a near-record high of 500 million barrels throughout the world, as refineries churn out product at a rapid pace amid low crude prices. Despite last week's draw, total petroleum inventories have spiked by approximately 25 million over the last nine weeks, according to Ion Energy Group analyst Kyle Cooper.

Overall, U.S. commercial crude inventories increased by 1.4 million barrels for the period in comparison with the week ending on July 22. At 522.5 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Analysts expected to see a decline of 1.4 million barrels, one day after the American Petroleum Institute reported a draw of 1.3 million barrels. At the Cushing Oil Hub in Oklahoma, inventories fell by 1.12 million barrels on the week. Cushing, the main delivery point for NYMEX oil, is the largest crude storage facility in the U.S.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose by more than 0.40% to an intraday high 95.35, bouncing off five-week lows. On Tuesday the index slipped below 95 for the first time since June 24. Before Wednesday's rebound, the Dollar had fallen sharply since hitting four-month highs at 97.62 early last week.

Dollar-denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates.

Source by Investing.com