New York, Aug 30, 2023 – Oil prices extended gains on Wednesday after U.S. government data showed tighter-than-expected crude supplies in the world’s biggest fuel consumer, while a hurricane in the Gulf of Mexico kept investors on edge.
Brent crude futures for October rose 21 cents to $85.70 a barrel by 1108 a.m. EDT (1508 GMT). The October contract expires on Thursday and the more active November contract was at $85.13, up 22 cents.
U.S. West Texas Intermediate crude futures rose 30 cents to $81.46.
Both benchmarks rallied by more than a dollar on Tuesday as the U.S. currency weakened after soft U.S. Job data reduced the likelihood of further increases to interest rates.
U.S. crude inventories fell by 10.6 million barrels in the last week to 422.9 million barrels, Energy Information Administration data showed on Wednesday. Analysts in a Reuters poll expected a 3.3-million-barrel drop.
Product supplied of finished motor gasoline – a proxy for demand – was at about 9.1 million barrels per day.
“I would expect (gasoline demand) to fall precipitously from here,” said John Kilduff, a partner at Again Capital, as gasoline demand typically peaks in the summer driving season.
Investors also had an eye on Hurican Idalia, which came ashore as a Category 3 storm on Wednesday morning in a Florida region where the state’s northern panhandle curves into the Florida Peninsula.
The hurricane had moved over the Gulf of Mexico to the east of major U.S. oil and natural gas production sites. The region accounts for about 15% of U.S. oil output and about 5% of natural gas production, according to the Energy Information Administration (EIA).
Oil major Chevron Corp evacuated some staff from the region but production was continuing.
Elsewhere, analysts expect Saudi Arabia, the world’s biggest oil exporter, to extend its voluntary output cut into October, keeping oil supply tight.
Based on that expectation, refining sources surveyed by Reuters forecast that Saudi Arabia’s official selling prices for all crude grades sold to Asia in October will be raised to their highest this year.
Meanwhile, the military seized power in Gabon on Wednesday, which could hit the country’s crude supplies and tighten the market further. Gabon exported a monthly average of 160,000 barrels per day to Asia from May to July, Kpler ship-tracking data showed.
Oil’s gains were capped, however, by concerns over the mixed economic situation in China, the world’s biggest oil importer.
Despite production cuts from Saudi Arabia, Russia and others, other exporters like Venezuela and Iran are filling some of the gap, said Ole Hansen, head of commodity strategy at Saxo Bank.
“Ongoing demand concerns may prevent prices from having a sustained move above $90,” he said. (Reuters)
