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Oil prices settle lower, pull back from 2023 highs

EIA reports a more than 6 million-barrel weekly drop in U.S. crude supplies

EIA reports a more than 6 million-barrel weekly fall in U.S. crude supplies.

Johannes Eisele/Agence France-Presse/Getty Images

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Oil futures settled lower on Thursday, with prices easing back after the U.S. benchmark rose for nine consecutive sessions to its highest levels of the year.

A government report showing a more than 6 million-barrel drop in weekly domestic crude supplies, however, helped to limit price losses for oil.

Price action

  • West Texas Intermediate crude for October delivery CL00, -0.25% CLV23, -0.25% fell 67 cents, or 0.8%, to settle at $86.87 a barrel on the New York Mercantile Exchange, after ending the previous session at its highest since Nov. 11. The U.S. benchmark’s nine-day winning streak ended Wednesday was its longest since 2019.
  • November Brent crude BRN00, -0.09% BRNX23, -0.09%, the global benchmark, fell 68 cents, or nearly 0.8%, to $89.92 a barrel on ICE Futures Europe. It rose for a seventh straight day Wednesday, logging its highest close since Nov. 16.
  • October gasoline RBV23, +1.15% tacked on 0.8% to $2.62 a gallon, while October heating oil HOV23, +0.99% added 0.6% to $3.21 a gallon.
  • October natural gas NGV23, +0.78% settled at $2.58 per million British thermal units, up nearly 2.8% after posting losses in the last four consecutive trading sessions.

Supply data

The Energy Information Administration on Thursday reported that U.S. commercial crude inventories fell by 6.3 million barrels for the week ended Sept. 1.

On average, analysts polled by S&P Global Commodity Insights expected the report to show a decrease of 5.6 million barrels. The American Petroleum Institute late Wednesday reported a decline of 5.5 million barrels in last week’s domestic crude supplies, according to sources.

“Continued strength in crude exports, which are now humming along near maximum capacity at just over 4.5 million [barrels per day], and net exports of refined products continuing to hold at seasonal record highs at nearly 4.2 million bpd, are leading to dwindling U.S. inventories despite the weakness in domestic demand,” Troy Vincent, senior market analyst at DTN, told MarketWatch.

The EIA report, which was released data a day later than usual due to Monday’s Labor Day holiday, also revealed a supply decline of 2.7 million barrels for gasoline, while distillate stockpiles edged up by 700,000 barrels. Analysts had forecast weekly inventory declines of 840,000 barrels for gasoline, while distillate stockpiles were seen as holding steady.

Crude stocks at the Cushing, Okla., Nymex delivery hub fell by 1.8 million barrels for the week, the EIA said.

Production cuts by the Organization of the Petroleum Exporting Countries have “left the world tight in crude supplies and the trend of inventory draws has continued throughout the month of August, supporting markets,” StoneX’s Kansas City energy team, led by Alex Hodes, wrote in Thursday’s newsletter, ahead of the EIA supply data.

The latest fall in crude supplies is the fourth straight weekly decline reported by the EIA.

In separate report Thursday, the EIA said U.S. natural-gas supplies in storage rose by 33 billion cubic feet for the week ended Sept. 1. On average, analysts surveyed by S&P Global Commodity Insights forecast an increase of 41 billion cubic feet.

Saudi Arabia, Russia output cuts

Crude-oil futures traded sharply higher this week after Saudi Arabia announced it would extend a production cut of 1 million barrels a day through the end of the year, with Russia also pledging to extend a supply cut.

Read: Why crude-oil rally can’t be ignored by investors — or the Fed

“Even though we have seen a good rally in crude recently, we see the energy complex continuing to go higher,” said Tariq Zahir, managing member at Tyche Capital Advisors.

Any weakness in oil may be an opportunity to add to long positions in oil, with the recent Saudi news along with Russia extending production cuts until the end of the year, he told MarketWatch.

See: Oil trades at 2023 highs. Are U.S. prices headed for $100?

Meanwhile, traders should be “increasingly focused on the Chinese response to extended crude supply cuts from OPEC+,” said DTN’s Vincent.

“China is already boosting product export quotas and is likely to begin materially cutting back on imports as they take advantage of the near record-high inventories they accrued in the first half of the year amid low prices,” he said. “While reports will, of course, be focused on the most timely and transparent oil data in the world from the U.S., how China decides to play their hand and utilize their inventories in the coming months will be increasingly important for price formation.”