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US Crude Trims Loss As Inventories Fall Sixth Week in a Row

September 2, 2020 at 15:07 by Andrew Moran

Crude oil futures are paring their losses midweek after the US government reported the sixth consecutive week of a supply drop. Oil prices have been trading in the $42 to $43 range in recent sessions as investors continue to weigh the fundamentals and the coronavirus pandemic. With signs that the US dollar could be starting a rebound, could oil’s rise hit the ceiling?

October West Texas Intermediate (WTI) crude futures dipped $0.04, or 0.09%, to $42.72 per barrel at 14:48 GMT on Wednesday on the New York Mercantile Exchange. US crude has slumped about 1.6% over the last week, bringing its year-to-date decline to around 30%.

Brent, the international benchmark for oil prices, is sliding in the middle of the trading week. November Brent crude futures tumbled $0.27, or 0.59%, to $45.31 per barrel on London’s ICE Futures exchange. Brent has shed roughly 2% in recent sessions, which has added to its YTD drop of 32%.

According to the US Energy Information Administration (EIA), domestic inventories declined by 9.4 million barrels for the week ending August 28, beating market forecasts of 1.2 million barrels. This is the sixth consecutive week of a supply drop. Crude stockpiles at the Cushing, Oklahoma storage facility fell by 6.4 million barrels.

Gasoline stockpiles decreased by 4.3 million barrels, while distillate supplies shed 1.7 million barrels.

Last week, the Baker Hughes oil rig count came in at 180 for the week ending August 28, down from 183 in the previous week. The total rig count was unchanged at 254.

Energy prices are looking to build on accelerating manufacturing activity in the world’s two largest economies. The US manufacturing purchasing managers’ index (PMI) swelled to an 18-month high last month, while the Chinese manufacturing PMI expanded at the fastest clip in about a decade in August.

But they might be affected by a slower-than-expected resumption of crude output in the aftermath of Hurricane Laura. On Tuesday, US Gulf of Mexico offshore oil production was down more than 525,000 barrels per (bpd), or 28.4% of the region’s daily output. Plus, 71 of the 643 manned platformed in the region was still under evacuation.

The greenback has turned things around on Wednesday as the US Dollar Index, which measures the buck against a basket of currencies, surged 0.51% to 92.81. A rising greenback is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase. It is unclear if this is the beginning of a dollar rally, but some analysts think that if Washington passes another stimulus and relief package, it could be good news for the buck.

In other energy markets, October natural gas futures picked up $0.033, or 1.21%, to $2.56 per million British thermal units (btu). October gasoline futures fell $0.0213, or 1.74%, to $1.2034 per gallon. October heating oil futures slid $0.0228, or 1.85%, to $1.208 a gallon.

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