Weekly U.S. crude supplies drop nearly 13 mln bbls; key East Coast refinery plans to permanently close

U.S. oil prices climbed by nearly 3% on Wednesday, as the U.S. government reported a weekly drop of nearly 13 million barrels in domestic crude stocks.

Gasoline futures also rallied on news of the planned closure of a key East Coast refinery. Prices for both U.S. oil and gasoline settled at their highest in five weeks.

“An eye opening [more than] 12 million-barrel draw in crude, which was 10 million barrels bigger than expected, should give support to the move” higher Wednesday, said Tariq Zahir, managing member at Tyche Capital Advisors.

Given the drawdown in gasoline inventories and supply decline at the U.S. oil trading hub at Cushing, Okla., “we wouldn’t be surprised to see the $60 level get breached in WTI,” he said. “However, with the upcoming OPEC meeting and also the [Group of 20 leaders summit], we will see the next directional move on the results of these two events.”

August West Texas Intermediate crude CLQ19, -1.13% rose $1.55, or 2.7%, to settle at $59.38 a barrel on the New York Mercantile Exchange after tapping a high at $59.93. The settlement was the highest for a front-month contract since May 22, according to Dow Jones Market Data.

International benchmark August Brent crude BRNQ19, -1.16% gained $1.44, or 2.2%, to $66.49 a barrel on ICE Futures Europe—the highest settlement in about a month.

The Energy Information Administration on Wednesday reported that U.S. crude supplies dropped by 12.8 million barrels for the week ended June 21. Analysts polled by S&P Global Platts expected a decline of 2.8 million barrels in crude stocks, on average. The American Petroleum Institute on Tuesday reported a 7.5 million-barrel fall.

Matt Smith, director commodity research at ClipperData, said the weekly crude inventory drop was the largest since September 2016. Net crude imports also dropped below 3 million barrels per day—the second-lowest level in the EIA’s records, he said.

The EIA data also showed that gasoline inventories were down by 1 million barrels, while distillate stockpiles fell 2.4 million barrels last week. The S&P Global Platts survey had shown expectations for supply declines of 1.1 million barrels each for gasoline and distillates.

On Nymex, July gasoline RBN19, -1.63%  jumped 9.3 cents, or 5%, to finish at $1.970 a gallon. July heating oil HON19, -0.95%  added 4.8 cents, or 2.5%, to $1.971 a gallon.

Gasoline futures settled at their highest in five weeks. The Philadelphia Energy Solutions refinery in Philadelphia plans to permanently shutdown, according to news reports. That follows an explosion and fire at the 335,000 barrel-per-day refinery Friday.

“I suspect we’ll see gasoline prices wobble a bit higher at the pump, and some of the advance is tied to higher crude prices ahead of the G20 meeting and in response to the large inventory drawdown,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. As far as the refinery goes, however, there are “plenty of additional barrels of gasoline at the Gulf Coast and in Europe and Canada to offset the loss of [the refinery’s] gasoline production.”

Still, the shutdown may lead to “pricing volatility in the months and years head” on the East Coast, said Patrick DeHaan, head of petroleum analysis at GasBuddy.

Read more: https://www.marketwatch.com/story/oil-prices-climb-on-reports-of-falling-us-supplies-2019-06-26?mod=us-markets


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