Oil prices jumped more than $2 per barrel on Wednesday as official data revealed a larger-than-expected drawdown in U.S. oil stocks, as well as expectations that demand will rise as vaccination roll-outs expand.
According to the Energy Information Administration, the United States’ crude oil stockpiles decreased last week to their lowest level since September 2019. The drawdown began in late August when Hurricane Ida shut down many refineries and offshore drilling production.
Brent crude gained $1.86, or 2.5 percent, to $75.46 a barrel. West Texas Intermediate (WTI) crude in the United States rose $2.15, or 3.1 percent, to $72.61 per barrel.
Brent reached $76.13 per barrel, a contract high and the highest outright price since late July.
Brent and WTI pricing is up substantially today, returning to prior summer highs, said Pavel Molchanov, Raymond James.
Oil momentum has remained consistent since late August, following Hurricane Ida, as the Gulf of Mexico struggles to resume output fully.
Last week, crude and distillate stockpiles in the United States fell more than projected. In contrast, gasoline stocks fell slightly less than expected.
Crude stockpiles declined by 6.4 million barrels in the week ending September 10 to 417.4 million barrels. In comparison, the prediction was at 3.5 million-barrel reduction by analysts in a Reuters poll.
We’ve seen substantial crude and product pulls. It is suitable for the energy complex, said Tony Headrick, energy market analyst at CHS Hedging. The last tropical storm slowed recovery operations from Hurricane Ida. Moreover, they will continue to see the effects of Ida for the next few days.
Damage from The Storm
On Tuesday, Tropical Storm Nicholas meandered slowly along the Gulf Coast, knocking out electricity to hundreds of thousands of homes and businesses, yet Texas refineries remained operational.
The storm’s damage comes just two weeks after Hurricane Ida knocked out a large percentage of Gulf Coast refining capacity. This year’s hurricane season has had a far more significant and longer-lasting influence on the global oil balance than prior years, said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. The International Energy Agency further bolstered oil prices. It indicated on Tuesday that vaccine roll-outs would propel a recovery, following a three-month drop in global oil consumption due to the spread of the Delta coronavirus type and repeated pandemic restrictions.
However, oil price gains were restricted in August. This happened due to a drop in China’s crude throughput. It had daily refinery runs reaching their lowest level since May 2020 and total industrial output falling.