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Futures Movers: Oil prices up over 2% as EIA reports a 7th straight weekly decline in U.S. crude inventories

Crude-oil futures rose by more than 2% on Wednesday, finding support after U.S. government data revealed that U.S. inventories declined for a seventh week in a row, even as gasoline stockpiles unexpectedly climbed.

Overall, the report was bullish, as crude supplies are “only going to get worse in the coming weeks” because inventories are “stretched and refiners are coming on back faster than supply of crude oil in the Gulf of Mexico,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.

“Gasoline inventories were up but that normally happens at this time of year,” so it’s partly seasonal and partly because of data that has been skewed due to Hurricane Ida,” he said.

Still, the market should be concerned about the tightness in distillate supplies, which “could create a squeeze as we get into winter,” said Flynn.

West Texas Intermediate crude for November delivery
CL00,
+2.11%

CLX21,
+2.11%

rose $1.74, or 2.5%, to settle at $72.23 a barrel on the New York Mercantile Exchange. That was the highest front-month contract finish since Thursday, according to FactSet data. November Brent crude
BRN00,
-0.35%

BRNX21,
-0.35%
,
the global benchmark, added $1.83, or 2.5%, at $76.19 a barrel on ICE Futures Europe.

The Energy Information Administration reported on Wednesday that U.S. crude inventories fell by 3.5 million barrels for the week ended Sept. 17. That compared with the average decline of 3.8 million barrels expected by analysts polled by S&P Global Platts forecast. The EIA had reported crude supply declines in each of the previous six weeks.

The American Petroleum Institute, an industry group, reported late Tuesday that U.S. crude supplies fell by 6.1 million barrels for the week.

“A big rebound in refining activity and a lesser increase from offshore Gulf of Mexico production”  encouraged another draw to U.S. crude inventories, said Matt Smith, lead oil analyst, Americas, at Kpler.

The EIA, however, also reported a weekly inventory increase of 3.5 million barrels for gasoline supplies, while distillate stockpiles were down by 2.6 million barrels. The S&P Global Platts survey had forecast supply decreases of about 900,000 barrels for gasoline and 1.4 million barrels for distillates.

“A big rebound in runs encouraged a solid build to gasoline inventories, while distillate inventories dropped amid a pop in implied demand,” said Smith.

On Nymex, October gasoline
RBV21,
+0.70%

tacked on 0.9% to $2.124 a gallon and October heating oil
HOV21,
+1.42%

rose 1.7% to $2.212 a gallon.

The EIA data also showed crude stocks at the Cushing, Okla., storage hub edged down by 1.5 million barrels for the week. However, total domestic petroleum production climbed by 500,000 barrels to 10.6 million barrels per day last week.

The EIA report offered a glimpse into “what is likely to come in the weeks ahead” with the reported decline in crude stocks at Cushing, said Troy Vincent, market analyst at DTN.

Oil and natural-gas production in the Gulf of Mexico has been slow to recover in the wake of Hurricane Ida, which made landfall on the Louisiana Gulf Coast on Aug. 29.

The Bureau of Safety and Environmental Enforcement late Wednesday estimated 16.2% of Gulf oil production remains shut in, equal to 294,414 barrels a day of production. More than 24% of natural-gas production is also shut in, equal to 541.12 million cubic feet a day.

“That lack of production is going to lead to a dangerous situation where crude supplies and natural gas supplies are still going to be falling at a time when the demand is going to rise again this winter,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report.

Also on Nymex Wednesday, October natural gas
NGV21,
-0.52%

settled flat at $4.805 per million British thermal units.

The EIA will release its report on U.S. natural-gas supplies on Thursday. On average, analysts forecast an increase of 70 billion cubic feet for the week ended Sept. 17, which would be slightly below than the five-year average rise of 74 billion cubic feet, according to a survey conducted by S&P Global Platts.

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