Oil prices saw an increase on Wednesday following a significant jump in U.S. refining activity last week. This activity led to a larger-than-expected decline in gasoline and crude inventories. However, the gains were limited because there were minimal supply disruptions from Hurricane Beryl. Brent futures increased by 42 cents, reaching $85.08 per barrel, while U.S. West Texas Intermediate (WTI) crude rose by 69 cents, settling at $82.10 per barrel.
During the session, WTI prices rose by as much as $1 after the U.S. Energy Information Administration reported a substantial drop in U.S. crude inventories. These inventories fell by 3.4 million barrels to 445.1 million barrels in the week ending July 5, significantly surpassing analysts’ expectations of a 1.3 million-barrel decrease. Gasoline stocks also saw a notable decline, falling by 2 million barrels to 229.7 million barrels, which was much larger than the 600,000-barrel draw analysts had anticipated during the U.S. Fourth of July holiday week.
Phil Flynn, an analyst at Price Futures Group, commented that the EIA data appears to be the main driving force behind the higher prices. Despite the increase, both crude futures contracts had ended the previous three sessions lower, primarily due to the Texas energy industry’s minimal impact from Hurricane Beryl. Oil and gas companies restarted some operations on Tuesday, and by Wednesday morning, the Port of Houston had returned to normal operation times for its eight public terminals. Refineries and offshore production facilities experienced limited storm damage and had largely resumed normal operations, reducing concerns about supply disruptions.
In addition to the inventory reports, Federal Reserve Chair Jerome Powell mentioned that he was not yet ready to declare inflation defeated but believed the U.S. was on a path to stable prices and continued low unemployment. Investors are optimistic about potential interest rate cuts in September, which could stimulate economic growth and increase oil demand.
Geopolitical risks had little impact on oil prices, as investors seemed fatigued by ongoing discussions about a ceasefire in Gaza and the war in Ukraine. Tim Snyder, an economist at Matador Economics, noted that the market appears to be discounting these news stories. In the Middle East, Hezbollah’s leader, Sayyed Hassan Nasrallah, stated that if Hamas reached a ceasefire deal with Israel, Hezbollah would cease its operations without needing separate negotiations. The group had started firing at Israeli targets on the border in support of Palestinians after Hamas’s attack on Israel on October 7 initiated the Gaza war.
On a Final Note, while oil prices have been influenced by various factors, the recent refining activity and significant inventory declines have been the primary drivers of the latest price increases, despite the minimal impact of Hurricane Beryl on supply.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
