Oil Rises With Shrinking U.S. Supplies and Broader Market Gain

Oil rallied after an industry report showed another big decline in U.S. crude inventories, indicating a tightening market.

Sheela Tobben

23 Sep 2021, 05:29 AM IST

Oil Rises With Shrinking U.S. Supplies and Broader Market Gain

An employee pours a sample of oil. (Photographer: Chris Ratcliffe/Bloomberg)

(Bloomberg) -- Oil advanced after U.S. crude inventories slid to the lowest since October 2018 amid a global energy crunch expected to increase demand.

Futures in New York rose 2.5% on Wednesday. Domestic crude stockpiles fell for a seventh straight week to about 414 million barrels, according to an Energy Information Administration report. Meanwhile, U.S. equities gained as concerns about China Evergrande Group’s debt woes eased. The bullish news overshadowed Federal Reserve officials signaling they would probably begin tapering their bond-buying program soon.

U.S. Oil Stockpiles Contracting Amid Global Energy Crisis: Chart

“The focus is back on supply and demand,” said Phil Flynn, senior market analyst at Price Futures Group Inc. “The market looks very bullish and has the potential to be under supplied. There is real concern about demand going into the winter season.”

Crude prices have increased this month after extreme weather disrupted U.S. supplies, and as a rally in natural gas spurred expectations consumers may switch to oil for power generation. Crude may surge to $90 a barrel if the approaching winter in the northern hemisphere proves colder than normal, according to Goldman Sachs Group Inc.

In physical markets, Mars crude slid for the second day as supplies of the medium sour grade are set to improve with the return of a critical pipeline in the Gulf of Mexico. Discounts for Heavy Louisiana Sweet also fell to the widest in more than a year as offshore production was restored by refineries in Louisiana remained offline due to storm-related damage.

Prices:
West Texas Intermediate crude for November delivery climbed $1.74 to settle at $72.23 a barrel in New York Brent for the same month rose $1.83 to $76.19 a barrel, the highest since July 30

The EIA data also showed U.S. gasoline inventories unexpectedly rose by 3.47 million barrels last week as U.S. Gulf Coast refineries ramped up operations after recent storms, but gasoline future managed to rise.

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