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Futures Movers: Oil prices fall with U.S. oil supplies down a 4th straight week, but product stocks up sharply

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Oil prices moved lower on Wednesday, giving up modest early gains, despite U.S. government data showing domestic supplies of crude oil fell by more than 5 million barrels last week, down a fourth week in row, though gasoline and distillate inventories each saw a sharp climb.

Worries that more interest rate rises by the Federal Reserve may cause a recession rippled across markets in recent days, pulling oil prices down for three sessions in a row, despite concerns about the impact of the Group of Seven price cap on Russian oil imposed on Monday.

Price action
  • West Texas Intermediate crude for January delivery
    CL00,
    -2.13%

     
    CL.1,
    -2.13%

     
    CLF23,
    -2.13%

    fell 25 cents, or 0.3%, to trade at $74 a barrel on the New York Mercantile Exchange. On Tuesday, it marked the lowest finish for a front-month contract since Dec. 23, 2021, according to Dow Jones Market Data.
  • February Brent crude
    BRN00,
    -1.69%

     
    BRNG23,
    -1.69%
    ,
    the global benchmark, lost 15 cents, or 0.2%, to $79.20 a barrel on ICE Futures Europe. It ended Tuesday at the lowest since Jan. 3.
  • Back on Nymex, January gasoline
    RBF23,
    -2.27%

    fell 0.8% to $2.1329 a gallon, while January heating oil
    HOF23,
    -3.09%

    traded at $2.8732 a gallon, down 1.5%.
  • January natural gas traded at $5.522 per million British thermal units, up 1%.
Supply data

The Energy Information Administration on Wednesday reported a fourth-consecutive weekly decline in U.S. crude inventories, but stocks of both gasoline and distillates climbed.

“If crude stocks can continue to fall, it would likely challenge the generally bearish trend that has defined [oil] prices for the past month,” said Robbie Fraser, manager, Global Research & Analytics at Schneider Electric.

Domestic commercial crude stocks fell by 5.2 million barrels for the week ended Dec. 2, the EIA said.

On average, analysts forecasted a decline of 2.6 million barrels, according to a poll conducted by S&P Global Commodity Insights. The American Petroleum Institute, a trade group, reported late Tuesday that crude supplies fell by 6.4 million barrels last week, Dow Jones reported, citing a source.

“Ongoing strength in refining activity and exports have encouraged another draw” for crude supplies, said Matt Smith, lead oil analyst, Americas, at Kpler, in reaction to the supply data.

As U.S. Strategic Petroleum Reserve transfers slow, U.S. commercial inventories are now lower year-to-date, “set for further downside in the weeks ahead,” he said.

The EIA, however, showed weekly inventory gains of 5.3 million barrels for gasoline and 6.2 million barrels for distillates. The S&P Global Commodity Insights survey had called for increases of 2.9 million barrels for gasoline and 1.9 million barrels for distillates.

Crude stocks at the Cushing, Okla., Nymex delivery hub declined by 400,000 barrels for the week, the EIA said, while stocks in the SPR fell by 2.1 million barrels.

Other market drivers

China has announced measures to roll back some of its COVID-19 restrictions. Those include limiting harsh lockdowns and ordering schools without known infections to resume regular classes, the Associated Press reported Wednesday.

“Traders have been looking for more positive news when it comes to China’s zero-tolerance COVID policies,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update.

And now “we have heard from the officials about a further easing of those measures,” providing support to investor sentiment in Asia — with the “spillover of this sentiment” likely impacting Europe and the U.S. given that China is the second biggest economy in the world, he said.

But Stephen Innes, managing partner at SPI Asset Management, warned that “China’s COVID tsunami is coming as the world’s most populous nation is being forced onto a zero-COVID off-ramp,” after a “way too early China reopening” supported some markets. “It will be a tale of two haves in China, where winter oil prices and COVID mobility woes give way to hope springs eternal in Q2.”

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