Oil futures: Crude selloff continues despite fall in US oil stocks

Quantum Commodity Intelligence - Crude oil futures Wednesday were lower, extending the previous session's sharp losses and giving up early gains, despite US oil data showing an overall reduction in oil stocks last week.

November ICE Brent futures were trading at $95.16/b (1950 GMT), compared to Tuesday's settle of $97.84/b and having traded in a range of $94.40-99.00/b. The Oct22 contract closed at $96.49/b.

At the same time, October NYMEX WTI was trading $89.13/b versus Tuesday's settle of $91.64/b.

Nov22 Brent prices had already slumped by over 5% on Tuesday, primarily reacting to fears of a slowdown in energy demand and China imposing fresh lockdown restrictions in several cities. Oil futures were also heading for a third month of losses and the longest losing streak in two years. 

The Energy Information Administration reported US crude stocks last week dropped 3.3 million barrels, while gasoline inventories were down 1.2 million barrels and distillates little changed.

US gasoline inventories fell for the fourth straight week, down 0.5% to 214.5 million barrels as of 22 August, according to EIA data released Wednesday. Stocks are around 6% below the same time last year and down by a similar amount from the five-year average for the week.

The American Petroleum Institute reported late Tuesday that US commercial crude inventories increased by 590,000 barrels last week. However, gasoline stocks posted a steep drop of 3.4 million barrels and distillate inventories fell by 1.72 million barrels.

The drop in refined products was partly caused by the shutdown at BP's 430,000 bpd Whiting refinery. 

On Tuesday, a number of China's largest cities imposed tougher Covid-19 curbs, including shutting down Shenzhen's Huaqiangbei district, home to the world's largest electronics wholesale market.

Adding to economic woes, the White House said Tuesday it expected US job numbers to cool ahead of Friday's non-farm payrolls report.

Oil was also dragged lower by tumbling natural gas prices, including Dutch TTF futures for Nov22 and Dec22 retreating from over €350/MWh on Friday to close around €270/MWh Tuesday.

Russia halted gas supplies via the Nord Stream 1 pipeline early Wednesday for planned maintenance, scheduled to last until 3 September.

Meanwhile, deadly clashes in Iraq's capital appear to have subsided. While no immediate impact on the oil sector was reported, analysts have warned any escalation could hit the oil exports.

"We haven't had any physical supply disruption yet from Iraq," Helima Croft, the chief commodities strategist at Canadian broker RBC, told CNBC. "This is something we would be really concerned about right now. Anything that would impact Iraqi production would be very material for the market."

Elsewhere, an Atlantic weather system designated 91L is expected to track away from the Caribbean and Gulf of Mexico, with models showing any potential storm taking a northerly turn towards the US East Coast.