By Barani Krishnan
Investing.com -- Oil climbed out of six-month lows on Wednesday after the U.S. government reported record crude exports for last week.
Gains in crude prices were, however, capped by expectations that a 2015 nuclear deal for Iran might be revived soon, paving the way for the removal of U.S. sanctions that could see some one million barrels per day or more of oil from the Islamic Republic returning to the market.
Also limiting crude’s rally was a Reuters report suggesting a surfeit of oil exports from Russia this year. Higher oil export volumes, coupled with rising gas prices, will boost Moscow’s earnings from energy exports to $337.5 billion this year, a 38% rise from 2021, according to an economy ministry document seen by Reuters.
West Texas Intermediate, the benchmark for U.S. crude, was up $1.72, or 2%, to $88.25 per barrel by 13:35 ET (17:35 GMT). It earlier hit a session high of $89.12, surging from Tuesday’s bottom of $85.73, which marked its lowest since Jan. 26.
Brent, the London-traded global benchmark for crude, was up $1.43, or 1.6%, to $93.77. Its session high was $95.95. On Tuesday, Brent fell $91.72, its lowest since Feb. 16.
Oil rallied after weekly inventory data from the Energy Information Administration showed stockpiles of US crude tumbling by some seven million barrels last week, after record high exports and a smaller-than-usual release from the nation’s emergency oil reserve.
Exports of crude oil hit an all-time high of five million barrels per day during the week ended August 12 while the Biden administration released just under 3.5 million barrels from the Strategic Petroleum Reserve compared with its typical weekly release of five-to-six million barrels that are aimed at bridging supply shortfalls in the market.
“It’s a story of exports, exports, exports for U.S. crude,” said John Kilduff, partner at New York energy hedge fund Again Capital. “The smaller-than-usual SPR release combined with that to bring down stockpiles from the previous two weeks.”
Stockpiles of crude had ballooned by around 10 million barrels during the weeks of August 5 and July 29 combined. For the latest week, industry analysts polled by U.S. media had expected a crude drawdown of 275,000 barrels instead.
U.S. oil production also ticked lower last week, to an estimated 12.1 million barrels per day from a previous 12.2 million, helping reduce crude stockpiles.
In the case of gasoline, the top automobile fuel in America, inventories tumbled by 4.64 million, adding to the previous week’s outsized drawdown of 4.98 million barrels. Analysts had expected a gasoline stockpile drop of just 1.1 million barrels for last week.
U.S. consumption of gasoline slumped in mid-June as pump prices hit record highs of $5 per gallon, prompting Americans to conserve fuel. Prices have fallen since to just below $4 per gallon, encouraging demand again.
As per the EIA data, demand for gasoline at U.S. pumps stood at 9.34 million barrels last week, versus the previous week’s 9.12 million and the year-ago level of 9.33 million.
Distillate stockpiles were about the only negative thing in the weekly inventory numbers released by the EIA.
Distillates — the oil variant required for making the diesel needed for trucks, buses and trains, as well as the fuel for jets — rose by 766,000 barrels last week, on top of the previous week’s build of 2.17 million. Analysts had forecast a build of 440,000 barrels.