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Oil prices rise after US data shows tighter crude supply

August 30, 2023By Reuters

NEW YORK, Aug 30 – Oil prices gained on Wednesday as US government data showed tighter-than-expected crude supplies, while concerns about the Chinese economy limited gains.

Brent crude futures for October rose 37 cents to settle at USD 85.86 a barrel. The October contract expires on Thursday and the more active November contract was up 33 cents at USD 85.21.

US West Texas Intermediate crude futures gained 47 cents to USD 81.63.

On Tuesday, both benchmarks rallied by more than a dollar as the US dollar weakened after soft jobs data reduced the likelihood of further interest rate hikes.

US crude inventories fell by 10.6 million barrels in the last week to 422.9 million barrels, Energy Information Administration data showed on Wednesday. Analysts in a Reuters poll expected a 3.3 million-barrel drop.

Product supplied of finished motor gasoline – a proxy for demand – was at about 9.1 million barrels per day.

“I would expect (gasoline demand) to fall precipitously from here,” said John Kilduff, a partner at Again Capital, as gasoline demand typically peaks in the summer driving season.

Investors kept an eye on Hurricane Idalia, which came ashore as a Category 3 storm on Wednesday morning in a Florida region where the northern panhandle curves into the peninsula. By midday, the hurricane approached southeastern Georgia as a Category 1 storm.

Elsewhere, analysts expect Saudi Arabia, the world’s biggest oil exporter, to extend its voluntary output cut into October, keeping oil supply tight.

Based on that expectation, refining sources surveyed by Reuters forecast that Saudi Arabia’s official selling prices for all crude grades sold to Asia in October will be raised to their highest this year.

Meanwhile, the military seized power in Gabon on Wednesday, which could hit the country’s crude supplies and tighten the market further. Gabon exported a monthly average of 160,000 barrels per day to Asia from May to July, Kpler ship-tracking data showed.

Oil’s gains were capped, however, by concern over the mixed economic situation in China, the world’s biggest oil importer.

Chinese refiners are poised to boost diesel exports in September to more than 1 million metric tons, drawn by lucrative margins from selling overseas and as they expect to receive more export quotas from Beijing, traders and analysts said.

“The market’s interpretation is if they are exporting this much product then things are not going so well with the Chinese economy,” said Andrew Lipow, president at Lipow Oil Associates in Houston.

Despite production cuts from Saudi Arabia, Russia, and others, other exporters like Venezuela and Iran are filling some of the gap, said Ole Hansen, head of commodity strategy at Saxo Bank.

“Ongoing demand concerns may prevent prices from having a sustained move above USD 90,” he said.

(Reporting by Stephanie Kelly in New York; Additional reporting by Paul Carsten in London, Yuka Obayashi in Tokyo, and Trixie Yap in Singapore; Editing by David Goodman, Nick Zieminski, David Evans, Mike Harrison, and David Gregorio)


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