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US Crude Rises 1% on First Weekly Supply Drop in a Month

July 1, 2020 at 16:40 by Andrew Moran

Crude oil futures rose as much as 1% midweek, driven by a sharp drop in domestic inventories. Oil prices found additional support in improving global economic data, particularly in Europe and China. But with a new wave of coronavirus infections in more than a dozen US states, can crude prices permanently top $40 this summer?

August West Texas Intermediate (WTI) crude oil futures surged $0.47, or 1.2%, to $39.74 per barrel at 16:25 GMT on Wednesday on the New York Mercantile Exchange. US crude just finished its best quarter on record, soaring more than 87% in the April-to-June period. Year-to-date, prices are down 35%.

Brent, the international benchmark for oil prices, is also mustering a modest rally in the middle of the trading week. September Brent crude futures tacked on $0.69, or 1.67%, to $41.96 per barrel on London’s ICE Futures exchange. Brent also posted a huge second-quarter, advancing nearly 64%.

According to the US Energy Information Administration (EIA), domestic crude supplies declined by 7.2 million barrels for the week ending June 26. This represented the first weekly supply drop in a month, and it is also more than the median estimate of a 2.7 million decrease. The US government reported that crude stockpiles at the Cushing, Oklahoma storage facility fell by 200,000 barrels.

Gasoline inventories increased by 1.2 million barrels, while distillate stockpiles decreased by 600,000 barrels.

Most of the supply drawdown was due to refiners increasing output following a drop in runs this spring amid the COVID-19 pandemic. Overall, refinery utilization rates jumped by 0.9% to a three-month high of 75.5%.

Oil prices found more support on reports that tens of millions of barrels of crude and other oil products stored on sea tankers are being sold.

Meanwhile, improving economic data in Europe and China further added to crude’s gains on Wednesday. A Caixin private business survey found that factory activity expanded at a faster-than-expected rate in June. Germany’s manufacturing sector slumped at a slower pace, and French factory activity rebounded last month.

In other energy commodities, August natural gas futures tumbled $0.068, or 3.88%, to $1.683 per million British thermal units (btu). August gasoline futures tacked on $0.0137, or 1.14%, to $1.2152 a gallon. August heating oil futures picked up $0.0194, or 1.61%, to $1.2056 per gallon.

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