Investing.com - A third straight weekly drawdown in crude stockpiles in the United States helped keep oil prices in the positive Wednesday, though gains were limited by broader concerns about the economy — evidenced by a quarterly downgrading of GDP estimates.
New York-traded West Texas Intermediate, or WTI, crude settled up 47 cents, or 0.6%, at $81.63 per barrel. Week-to-date, the U.S. crude benchmark is up 2% after a combined drop of some 4% over two prior weeks and an earlier rally of 20% over seven weeks.
London-traded Brent settled up 37 cents, or 0.4%, at $85.86 per barrel. Brent rose 1.6% on the week, after a combined 2.3% drop over two weeks. Prior to that, the global crude benchmark rose for seven weeks in a row, gaining a total of 18%.
Modest crude price gain; U.S. GDP worry outweighs supply tightness
While crude prices have advanced without a break over the past sessions, the gains have been mostly modest on a daily basis, and often after volatile trading on demand concerns.
On Wednesday, for instance, both WTI and Brent turned negative at one point, weighed by a downgrade to estimates on U.S. economic growth. The Commerce Department said U.S. Gross Domestic Product, or GDP, likely grew 2.1% year-on-year in the second quarter of 2023 instead of a previously estimated 2.4%,
“Oil prices have a close nexus with U.S. GDP and, therefore, it isn’t surprising that some market participants took the reading seriously enough to keep a lid on crude prices despite the large headline number on U.S. crude draws,” said John Kilduff, partner at New York energy hedge fund Again Capital.
U.S. crude oil stockpiles fell by 10.6 million barrels last week, according to a government report on Wednesday that showed a third straight week of such inventory declines as refiners maxed out fuel processing to prepare for this year’s last hurrah in summer travel.
The upcoming Labor Day holiday on Sept 4 unofficially brings to a close U.S. road trips for this summer and the Energy Information Administration, or EIA, said in its Weekly Petroleum Status Report that refiners maintained an extraordinarily high 93.3% run rate on their capacity for the week ended Aug. 25.
Exports of U.S. crude also remained solidly within the 4.0-5.0 million barrel-per-day mark as American energy firms found more demand overseas amid a supply vacuum and underserved buyers caused by Saudi and Russian production cuts, the weekly EIA report showed. Last week alone, U.S crude exports were at 4.528M barrels, on top of the 4,258M-barrel shipment noted for the week ended Aug. 18.
“The runaway U.S. crude exports are proof that American companies are helping relieve the tightening of the global oil market caused by Saudi-Russian cuts,” said Again Capital’s Kilduff. “It’s another reason why oil prices need not go up too much.”
The net result of the refining runs and crude exports pulled some 10.584M barrels from inventories during the week ended Aug 25, the EIA said. Prior to this, the agency reported a 6.135M drawdown for the week to Aug. 18 and a 5.960M pull for the week ended Aug. 11.
On the gasoline inventory front, the EIA reported a decline of 0.214M barrels, after a slide of 1.467M barrels last week. Analysts had forecast a decline of 0.933M for last week. Automotive fuel gasoline is the No. 1 U.S. fuel product.
With distillate stockpiles, however, there was a build of 1.235M that added to the prior week’s gain of 0.945M. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets.
Hurricane Idalia not helping oil market after initial boost
Questions about the impact to energy production from Hurricane Idali also weighed on the market, after Tuesday's initial price boost on fears associated with the storm.
Hurricane Idalia, which came ashore as a Category 3 storm on Wednesday morning in a Florida region. While some oil operations in the Gulf of Mexico saw some action to evacuate some personnel out of an abundance of caution, the track of the storm suggests there may be no measurable impact on refineries or production.
(Ambar Warrick contributed to this item)