Lower Supplies, Short Covering Fuel Rebound In Crude; Refinery Usage Up
U.S. crude futures ended more than 3% higher on Wednesday after government data showed that crude stocks fell last week as refinery usage rose.
Crude touched off a short-covering rally around midday after weakening earlier as refined products fell in the initial reaction to data showing gasoline and distillate inventories rose last week.
Gasoline futures recovered from session losses to post strong gains as some traders took the day’s price dip as a buying opportunity, some analysts said.
Heating oil futures also recouped losses to end higher.
Electronic trading of NYMEX energy futures in the Chicago Mercantile Exchange’s Globex platform suffered a technical glitch late morning and was down for more than an hour.
On the New York Mercantile Exchange, September crude settled up $2.32. or 3.1%, at $75.88 a barrel, after trading after trading from $73.10 to $75.92. After settlement, September crude continued to rise, hitting $76.13.
While crude stocks fell within market expectations, some analysts attributed the rally to a big drop in supplies stored in the Cushing, Okla., delivery point for NYMEX-traded crude.
At the Midwest hub, crude stocks fell 1.4 million barrels, or 6.2%, to 21.2 million barrels, the data showed.
“The market is generally concerned about that draw in Cushing. Regardless of the supplies we see elsewhere in the United States, we are still seeing draws at Cushing. I think that has underpinned the market.” said Stephen Schork, president of the Schork Report.
In London, September Brent was up $1.27, or 1.7%, at $76.35 a barrel, trading from $74.23 to $76.40.
In New York, NYMEX August RBOB gasoline gained 4.02 cents, or 2%, to settle at $2.0879 a gallon, after trading $2.02 to $2.0958.
“There is nothing bullish about the EIA report on gasoline, but a lot of people may have covered shorts,” said Eric Wittenauer, analyst at A.G. Edwards in St. Louis, Missouri.
“Also, we’ve seen that recently people like to add longs over dips and this is probably a case where they saw the dip as a buying opportunity,” he added.
The U.S. Energy Information Administration said for the week ending July 20, U.S. crude stocks fell 1.1 million barrels to 351 million barrels, against forecasts in a Reuters poll for a draw of 1.2 million barrels.
Domestic production dipped 17,000 bpd, or 0.3 %, to 5.18 million barrels per day while imports were nearly static at 10.38 million bpd.
Refinery utilization rose 0.7 percentage point to 91.7% of production, just below the average forecast for a 0.8 percentage point increase.