Futures Movers: Oil prices at 2023 highs after fall in U.S. crude inventories

Oil futures traded at their highs for the session and the year on Wednesday after official data showed a drop in U.S. crude supplies last week.

Price action

West Texas Intermediate crude for November delivery
CL.1,
+3.94%

CL00,
+3.94%

CLX23,
+3.94%
rose $2.20, or 2.4%, to $92.59 a barrel on the New York Mercantile Exchange, touching its highest intraday level of the year.

November Brent crude
BRNX23,
+3.00%,
the global benchmark, was up $1.88, or 2.1%, at $95.66 a barrel on ICE Futures Europe. December Brent
BRN00,
+2.25%

BRNZ23,
+2.25%,
the most actively traded contract, gained $1.51, or 1.6%, to $93.94 a barrel.

October gasoline
RBV23,
+1.48%
rose 1.8% to $2.608 a gallon, while October heating oil
HOV23,
+2.92%
was up 0.9% at $3.255 a gallon.

October natural gas
NGV23,
+4.33%
gained 3.2% to $2.742 per million British thermal units.

Market drivers

The Energy Information Administration on Wednesday said U.S. crude inventories fell 2.2 million barrels last week, while gasoline inventories rose 1 million barrels and distillate stocks increased by 400,000 barrels.

Analysts surveyed by S&P Global Commodity Insights, on average, had expected U.S. crude stocks to show a fall of 2.2 million barrels, with gasoline down 800,000 barrels and distillate stocks down 1.1 million barrels.

Crude at Cushing, Oklahoma, the delivery hub for Nymex WTI futures, fell 900,000 barrels to 22 million. The analysts expected Cushing to see a 1 million barrel draw in crude supplies. Tight inventories at Cushing have been cited as an added factor in WTI’s rally and in driving the market into backwardation — a phenomenon in which nearby futures contracts trade higher than deferred contracts, reflecting tight supply.

The November WTI contract’s premium over the December contract
CLZ23,
+3.08%
widened sharply to around $2.20.

Crude rebounded from early weakness Tuesday to finish higher, despite pressure on other assets perceived as risky that saw the Dow Jones Industrial Average
DJIA
post its biggest one-day fall since March as it and the S&P 500
SPX
posted their lowest finish since early June. Crude also remained firm despite further strength in the U.S. currency, with the ICE U.S. Dollar Index
DXY
hitting a 10-month high on Tuesday.

“The price action suggests that tightening fundamentals are largely driving the market at the moment. Although clearly, external influences will be providing some headwinds to the oil market,” said Warren Patterson and Ewa Manthey, commodity strategists at ING, in a note.

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