Oil futures declined on Wednesday, with U.S. prices pulling back from a seven-year high after U.S. government data showed a rise in domestic crude inventories, along with a drop in stockpiles at a key crude delivery hub.
Wednesday’s price decline “primarily reflects traders trying to lock in their gains, rather than a change in fundamentals,” Manish Raj, chief financial officer at Velandera Energy Partners, told MarketWatch.
Notwithstanding the small crude inventory build reported by the Energy Information Administration and the American Petroleum Institute, “traders are aware that the market remains tight, the natural gas crisis in Europe continues and [liquefied natural gas] shipping lines remain clogged, while demand for all fuel types — coal, gas and oil — remains robust,” he said.
West Texas Intermediate crude for December delivery
fell $1.53, or 1.8%, to $83.12 a barrel on the New York Mercantile Exchange, after ending Tuesday at another seven-year high.
December Brent crude
the global benchmark, was down $1.69, or 2%, at $84.71 a barrel on ICE Futures Europe, after closing Tuesday at a three-year high. January Brent
the most actively traded contract, was down $1.75, or 2%, at $83.90 a barrel.
The Energy Information Administration reported on Wednesday that U.S. crude inventories rose by 4.3 million barrels for the week ended Oct. 22. On average, analysts polled by S&P Global Platts expected a 100,000-barrel decline, but the American Petroleum Institute on Tuesday reported a 2.3 million-barrel climb, according to sources.
The EIA data also revealed that crude stocks at Cushing, Oklahoma, the delivery hub for Nymex futures, fell by 3.9 million barrels for the week.
Read: Why oil traders say this key crude delivery point looks ‘basically empty’
“While the headline crude build may be viewed as bearish, another significant drop in Cushing inventories — now down to 27 million barrels, the lowest since October 2018 — is likely set to limit today’s selloff,” said Matt Smith, lead oil analyst, Americas, at Kpler. “At the recent pace of draws, Cushing could be close to tank bottoms by December.”
However, “Saudi Arabia really is…in control of price action as we go forward,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. The Organization of the Petroleum Exporting Countries meets next week and the U.S. administration has been pushing OPEC to increase production.
“The only real production that can be increased in a timely fashion is from Saudi Arabia,” said Zahir. “Nigeria and others have had a hard time just trying to keep up with the increase in production that is already happening. All eyes will be on the OPEC meeting next week to see what Saudi Arabia does.”
Meanwhile, the EIA also reported weekly inventory declines of 2 million barrels for gasoline and 400,000 barrels for distillates. The S&P Global Platts survey expected supplies to decrease by 2.7 million barrels for gasoline and 2 million barrels for distillates.
“Subdued refining activity has resulted in modest draws to both gasoline and distillates, despite implied demand dropping for both,” said Kpler’s Smith.
On Nymex Wednesday, November gasoline
lost 2% to $2.467 a gallon and November heating oil
shed 1.8% to $2.532 a gallon.
Natural-gas futures inched higher ahead of the expiration of the November contract at the end of the session.
November natural gas
rose 1.5% to $5.97 per million British thermal units, with front-month prices topping $6 intraday, their highest intraday level in about three weeks. The December natural-gas contract
which becomes the front month at the end of the session, tacked on 0.9% to $6.055 per million Btus.