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Futures Movers: U.S. oil prices finish lower as traders reconsider demand prospects

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U.S. oil futures on Wednesday ended lower but the global benchmark prices finished slightly higher in a mixed day of trading for oil contracts.

Traders reconsidered the outlook for oil demand, despite U.S. data showing the biggest weekly drop in domestic crude supplies since January.

“It seems they are the two counterweights for prices at the moment — the U.S. inventory draw is supportive, while India demand concerns and uncertainty persist,” Matt Smith, director of commodity research at ClipperData, told MarketWatch.

West Texas Intermediate crude for June delivery
CL00,
-0.49%

CLM21,
-0.49%
,
the U.S. benchmark, fell 6 cents, or nearly 0.1%, to settle at $65.63 a barrel on the New York Mercantile Exchange. Prices traded as high as $66.76, the highest front-month intraday level since March, FactSet data show.

July Brent
BRN00,
-0.35%

BRNN21,
-0.35%
,
meanwhile, added 8 cents, or 0.1%, at $68.96 a barrel on ICE Futures Europe, following a climb to as high as $69.95.

Oil prices saw gains early Wednesday on expectations that an economic recovery in the U.S. and Europe would lead to higher demand for oil. A U.S. government report also revealed a hefty weekly decline in U.S. crude inventories, but WTI prices turned lower ahead of the trading settlements.

Several U.S. states have scrapped or plan to ease lockdown restrictions in coming weeks as COVID infection rates decline. Improved vaccine rollouts and easing restrictions on travel have also contributed to optimism over European fuel demand.

Still, India’s hospitals remain overwhelmed by cases, exacerbated by a dearth of public-health resources, including oxygen.

Read: India’s foreign minister exits G-7 over coronavirus concerns

The “virus is a big wildcard” as India is going to take some time to recover, said Tariq Zahir, managing member at Tyche Capital Advisors. Also, the members of Organization of the Petroleum Exporting Countries are starting to add oil to the market, which could “take some steam out of the energy markets in the months ahead.”

On Wednesday, the Energy Information Administration reported that U.S. crude inventories fell by 8 million barrels for the week ended April 30. That was the biggest weekly decline since January.

On average, analysts polled by S&P Global Platts forecast a decline of 3.9 million barrels for crude stocks, while the American Petroleum Institute on Tuesday reported a 7.7 million-barrel drop.

“Stronger refinery runs and hefty exports have resulted in a solid draw to crude inventories,” said Smith. “As refineries gear up for a monumental summer driving season, refining activity should only increase from here on out, while Asian demand is set to bolster U.S. oil exports going forward — inventory draws ahoy.”

Meanwhile, the data from the EIA Wednesday also showed crude stocks at the Cushing, Okla., storage hub rose by 200,000 barrels for the week.

Gasoline supply inched higher by 700,000 barrels, while distillate stockpiles declined by 2.9 million barrels for the week, according to the EIA report. The S&P Global Platts survey had expected weekly supply declines of 500,000 barrels for gasoline and 1.6 million barrels for distillates.

Gasoline prices are likely to continue to rise, “creating an unwanted tax on the consumer in the days and weeks ahead,” said Zahir. “This could, as time goes on, start to see an impact on demand and with OPEC starting to add oil to the markets.”

On Nymex Wednesday, June gasoline
RBM21,
-0.34%

settled virtually unchanged at $2.15 gallon and June heating oil
HOM21,
-0.16%

added 0.2% to $2 a gallon.

June natural gas
NGM21,
-0.91%

declined by 1% to $2.94 per million British thermal units.

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