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Futures Movers: Oil slips as U.S. crude supplies drop, but gasoline stocks unexpectedly climb

U.S. government data showed a weekly decline of more than five million barrels in domestic crude inventories, but gasoline stockpiles saw a surprise increase, prompting prices for crude oil to end just pennies lower for Thursday’s session.

Expectations that the summer driving season will bring higher demand for fuel have contributed to an overall rise in crude oil prices, with U.S. benchmark West Texas Intermediate and global benchmark Brent crude settling Wednesday at their highest levels in more than two years.

The gains, however, have been kept in check by the potential addition of oil supply from Iran.

The Energy Information Administration reported on Thursday that U.S. crude inventories fell by 5.1 million barrels for the week ended May 28. Supply data were released a day later than usual due to Monday’s U.S. Memorial Day holiday.

On average, analysts polled by S&P Global Platts forecast a decline of 3.3 million barrels. The American Petroleum Institute reported late Wednesday that U.S. crude supplies fell 5.4 million barrels last week.

“With refining activity hopping higher to the quickest pace of runs since mid-March 2020 and with crude imports dipping, oil inventories have shown a decent draw,” said Matt Smith, director of commodity research at ClipperData, in emailed commentary.

“On the flip side, a chunky drop in implied demand for both gasoline and distillates has encouraged a build for both,” he said.

Finished motor gasoline supplied, a proxy for demand, was at 9.15 million barrels per day last week, down 333,000 from the week before, EIA data showed. Gasoline supply climbed by 1.5 million barrels, while distillate stockpiles rose by 3.7 million barrels for the week. The S&P Global Platts survey had expected weekly supply declines of 1.1 million barrels for gasoline and 1.6 million barrels for distillates.

West Texas Intermediate crude for July delivery
CL00,
-0.01%

CLN21,
-0.01%

fell 2 cents, or 0.03%, to settle at $68.81 a barrel on the New York Mercantile Exchange. August Brent crude
BRN00,

BRNQ21,
,
the global benchmark, lost 4 cents, or 0.06%, at $71.31 a barrel on ICE Futures Europe.

On Wednesday, WTI saw the highest close for a front-month contract since Oct. 22, 2018, while Brent saw its highest finish since May 21, 2019, according to Dow Jones Market Data.

Among the oil products traded on Nymex, July gasoline
RBN21,
+0.31%

rose nearly 0.4% to $2.20 a gallon, while July heating oil
HON21,
-0.24%

shed 0.3% to $2.10 a gallon.

The EIA data also showed crude stocks at the Cushing, Okla., storage hub edged up by 700,000 barrels for the week, but total U.S. oil production fell 200,000 barrels to 10.8 million barrels per day.

Overall, the oil market in the short term is likely “slightly overbought and the risk…is to the downside,” said Tariq Zahir, managing member at Tyche Capital Advisors.

The economy in India, the third largest consumer of crude oil, continues to be negatively impacted by COVID, and oil traders have been weighing the prospect of a nuclear deal with Iran that may bring back Iranian oil to the market later in the year, Zahir told MarketWatch.

Still, “we haven’t seen any progress in those talks” and that may be one of the reasons for the recent strength in the energy markets, he said.

Prices will likely “consolidate” at these levels, with upside risk from the Atlantic hurricane season and U.S. energy consumption improving on the back of the rise in travel, said Zahir. Downside risk. meanwhile, may come from Friday’s U.S. jobs report if the data covering the month of May is weaker than expected, he said.

Read: Why summer cooling demand and Atlantic hurricane season don’t guarantee further gains for natural-gas prices

Meanwhile, natural-gas futures finished lower Thursday after the EIA reported an increase of 98 billion cubic feet in U.S. supplies of the fuel for the week ended May 28. IHS Markit had forecast a climb of 118 billion cubic feet.

Read: Here are the oil and gas companies whose methane emissions intensity is 6 times the national average

July natural gas
NGN21,
-0.78%

edged down by 3 cents, or 1.1%, to settle at $3.04 per million British thermal units.

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