Oil futures traded sharply higher on Thursday, with U.S. prices topping $70 a barrel for the first time in nearly a month, supported by recent data that showing a sharp drop in U.S. crude inventories.
Prices moved up despite a decision by a group of global oil producers to make no changes to their plan to gradually increase crude production.
It’s a case of “sell the rumor, buy the news,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.
The Organization of the Petroleum Exporting Countries and its allies, a group collectively known as OPEC+, decided Wednesday to stick to a plan reached in July to increase oil production by 400,000 barrels a day each month from August.
The decision came despite pressure from the Biden administration for the group to pump even more oil to help lower prices, said Richey. That, “paired with the fact that the group’s leadership reiterated commitment to stable market conditions and flexibility in future policy decisions to make sure that goal is achieved,” helped oil rally in the wake of the meeting, he said.
A big draw in commercial crude-oil stockpiles reported by the Energy Information Administration, and a new pandemic-era low in weekly jobless claims reported Thursday, may have also added “tailwinds to energy markets,” said Richey.
West Texas Intermediate crude for October delivery
rose $1.94, or 2.8%, at $70.53 a barrel on the New York Mercantile Exchange. Front-month prices for the U.S. benchmark haven’t touched intraday highs above $70 since Aug. 6, FactSet data show.
Global benchmark November Brent crude
added $1.81, or 2.5%, to $73.40 a barrel on ICE Futures Europe, poised for the first gain in three sessions.
Some analysts had anticipated that OPEC+ would consider a delay in proceeding with lifting output curbs due the spread of the delta variant of the coronavirus which has threatened to weaken energy demand.
After the decision, Caroline Bain, chief economist at Capital Economics, said the move may lead to a surplus in global supplies early next year and pressure prices for Brent crude.
However, market participants said U.S. petroleum supply data reported Wednesday was supportive.
The Energy Information Administration reported that U.S. crude inventories fell by 7.2 million barrels for the week ended Aug. 27 following three weeks of declines in a row, more than 60% greater than the average decline of 4.4 million barrels expected by analysts polled by S&P Global Platts.
Gasoline supplies, however, edged up by 1.3 million barrels last week, EIA data showed.
Gasoline supplies “may not maintain that trend” with the U.S. Labor Day holiday approaching and the temporary shutdown of the Colonial Pipeline likely to impact this week’s data, said Marshall Steeves, energy markets analyst at IHS Markit. The EIA will issue its next inventory report, covering the week ended Sept. 3, next Thursday — a day later than usual because of Monday’s Labor Day holiday.
Natural-gas futures, meanwhile, were poised to score their sixth gain in seven sessions, with the October contract
up 2% at $4.71 per million British thermal units.
The EIA on Thursday reported that domestic supplies of natural gas rose by 20 billion cubic feet for the week ended Aug. 27. That matched the average increase forecast by analysts polled by S&P Global Platts.
Supplies in storage stand below the year-ago and five-year average levels, according to EIA data. The Bureau of Safety and Environmental Enforcement reported Wednesday 83.21% of natural-gas production in the Gulf of Mexico remains shut in in the wake of Hurricane Ida.