A worker prepares pipes destined for the Clair Ridge oil and gas field off the Shetland Isles, before loading onto the Normand Oceanic offshore supply ship, operated by Subsea 7 SA, on the dockside of the Cromarty Firth in Invergordon, U.K. (Photographer: Simon Dawson/Bloomberg)

Oil Rises as Industry Group Shows U.S. Crude and Fuel Stock Drop

(Bloomberg) -- Crude popped after an industry report showed declines in crude, gasoline, distillate and Cushing, Oklahoma stockpiles, indicating strong seasonal demand for U.S. supplies.

Futures burst higher from the settlement in New York on Tuesday after the American Petroleum Institute was said to report nationwide crude stockpiles declined 3.16 million barrels last week. At the same time, API indicated a decline in supplies at the key Cushing pipeline hub, which would be for a 10th straight week, if Energy Information Administration data confirms it on Wednesday.

“It’s a bit of surprise that it’s across the board,” said James Williams, president of London, Arkansas-based energy researcher WTRG Economics. “It’s clearly a bullish report. It’s the normal summer tightening because it’s driving season.”

Oil Rises as Industry Group Shows U.S. Crude and Fuel Stock Drop

The U.S. oil benchmark has declined almost 8 percent this month amid escalating trade tensions between the U.S. and China that threaten global energy demand. While prices gained briefly on Monday amid a war of words between the U.S. and Iran over oil exports - a war that has since appeared to soften - investors remain worried about oversupply. Producers including Saudi Arabia have pledged to boost production to make up for losses from other nations.

West Texas Intermediate crude for September delivery traded at $68.75 a barrel at 4:36 p.m. after settling at $68.52 on the New York Mercantile Exchange. Total volume traded was about 36 percent below the 100-day average.

Brent for September settlement added 38 cents to end the session at $73.44 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $4.92 premium to WTI.

Brent contracts are signaling a short-term surplus. The September contract was trading at a 36-cent discount to October - a condition known as contango - as higher Libyan production allayed supply concerns after a labor dispute at North Sea platforms operated by Total SA.

In the U.S., crude inventories are currently sitting at about 411 million barrels, near the lowest level since February 2015. A U.S. government report is forecast to show a 3 million-barrel decline in commercial crude stockpiles, according to a Bloomberg survey.

An earlier Bloomberg forecast showed inventories at the key Cushing storage hub declined by an estimated 900,000 barrels last week.

The API was also said to report that gasoline supplies slid 4.87 million barrels. That would be the biggest draw since March if EIA data confirms it. Meanwhile, distillate inventories dropped 1.32 million barrels and Cushing supplies decreased 808,000 barrels.

“What we’ve been seeing in the crude stock numbers is increased volatility,” said Bill O’Grady, chief market strategist at Confluence Investment Management LLC in St. Louis. “The reality is this is high gasoline demand season. They’re going to keep refineries operating pretty strongly until after Labor Day.”

Oil-market news:

  • Gasoline futures added 0.2 percent to settle at $2.0956 a gallon, the highest level in more than a week.
  • Permian oil bottlenecks will persist into 2020, Wells Fargo Securities LLC analysts led by Michael Blum wrote in a note.
  • Vitol Group paid a record of more than $1.6 billion to its top executives and staff through share buybacks last year.
  • Exxon Mobil Corp. increased its estimate for a giant offshore oil discovery in Guyana by 25 percent yesterday, but it may be just the start.

©2018 Bloomberg L.P.