Oil futures posted strong gains Wednesday morning, hitting a five-month high, after data from an industry trade group showed large drops in U.S. stockpiles of crude and gasoline.
West Texas Intermediate crude for September delivery surged $1.66, or 4%, to $43.38 a barrel on the New York Mercantile, while the global benchmark, October Brent crude, was up $1.60, or 3.6%, at $46.04 a barrel on ICE Futures Europe. Both benchmarks traded at their highest since March 6.
The American Petroleum Institute late Tuesday said U.S. crude-oil inventories fell 8.6 million barrels last week, according to sources. The industry trade group said gasoline stocks fell by 1.7 million barrels, while distillate supplies rose by 3.8 million barrels. The Energy Information Administration’s more closely followed inventories report is due Wednesday morning.
Analysts said a further drop in crude and gasoline stocks could help underpin optimism over demand. Analysts surveyed by S&P Global Platts, on average, look for EIA crude inventories to show a fall of 4.1 million barrels, while gasoline stocks are forecast to decline 1.3 million barrels and distillate supplies are seen rising 100,000 barrels.
But some market watchers warned that upbeat expectations reflected by the crude rally may be premature.
“Though fears of weak demand due to corona are beginning to recede into the background at present, we believe the optimism displayed by oil market participants and oil prices themselves to be excessive,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note. “OPEC’s premature expansion of production and the fact that demand remains fairly weak argue against any further price rise.”
OPEC+ pledged to cut output by 9.7 million barrels a day beginning in May, easing to 7.7 million barrels a day this month and running through the end of the year. Countries that exceeded the earlier curbs are supposed to further curtail output, which means output is targeted to rise by around 1.5 million barrels a day beginning this month, though skeptics doubt that past violators of such agreements will fully comply.
Crude’s rally was also in tune with gains for stocks, with U.S. equities on track for a solidly higher open.
In other energy trading, September gasoline rose 3.5% to $1.2562 a gallon, while September hearing oil jumped 3.3% to $1.3003 a gallon.
September natural-gas futures advanced 2.5% to $2.248 per million British thermal units.