Oil futures: WTI 2% lower despite record EIA, API crude draws

Quantum Commodity Intelligence – Crude oil futures Wednesday were lower as renewed concerns over the US economy erased earlier gains, which came after US data from the API revealed a massive fall in crude oil inventories during the final week of July.

Oct23 ICE Brent futures were trading at $83.51/b (1915 GMT), compared to an earlier high of $85.99 and Tuesday's settle of $84.91/b.

At the same time Sep23 NYMEX WTI was trading $79.86/b, versus Tuesday's close of $81.37/b and having earlier challenged the highest levels of 2023, peaking at $82.43/b.

Data released late Tuesday by the American Petroleum Institute revealed a huge draw in commercial crude oil stocks last week of 15.4 million barrels, reported as the highest ever in records stretching back to 1982.

Prices briefly recovered from the lows after data from the Energy Information Administration also showed a massive drop in crude inventories of over 17 million barrels, but not enough to push prices back into positive territory with end-user demand figures sharply lower on the week.

Refined products showed more modest draws, according to the API, with distillates down 512,000 barrels and a drop in gasoline inventories of 1.68 million barrels.

Bullish demand forecasts and OPEC+ discipline had underpinned oil prices earlier, while global product cracks have largely been in a strong uptrend.

The 3-2-1 crack spread, a measure of US refining profitability based on gasoline and heating oil margins, remains comfortably above $40/b.

Balance

Cancelling Wednesday's early gains, the Fitch Ratings agency downgraded the long-term credit rating of the US from its highest mark of AAA to AA+, over America's debt levels and having narrowly avoided defaulting two months ago.

Meanwhile, the rebound in the Dollar Index this week, hovering around 102.50 points Wednesday, has also tempered gains.

Prices were also weighed down as US job openings declined from 9.616 million openings to 9.582 million, which is the lowest level since February 2021. 

Additionally, ISM manufacturing data contracted for a ninth straight month, as US demand remains weak but could be showing signs it is bottoming out. The headline ISM index report came in at 46.4, above the 46.0 previous reading, but a miss of the 46.9 forecast.