- US crude inventories dropped by 10.6 million barrels last week.
- Gabon’s coup raised concerns about potential disruptions in the country’s crude supplies.
- Chinese refiners will likely increase diesel exports to more than 1 million metric tons.
Oil prices rose on Wednesday due to tighter-than-expected US crude supplies, although concerns about the Chinese economy tempered the gains. On Tuesday, oil benchmarks surged by over a dollar as the US dollar weakened, following soft jobs data. This report reduced the chances of further interest rate hikes.
US crude inventories (Source: Bloomberg, EIA)
On Wednesday, the Energy Information Administration’s data revealed that US crude inventories dropped by 10.6 million barrels last week to 422.9 million. This significant decrease exceeded the forecasted 3.3 million-barrel decline from analysts in a Reuters poll. The demand indicator, gasoline product supplied, stood at approximately 9.1 million barrels daily.
Moreover, investors closely monitored Hurricane Idalia, which landed Wednesday morning as a Category 3 storm in a Florida region that curves into the peninsula’s northern panhandle. By midday, the hurricane weakened to a Category 1 storm while approaching southeastern Georgia.
Analysts anticipate Saudi Arabia, the largest global oil exporter, will prolong its voluntary output cut into October to maintain a tight supply. Considering this projection, refining sources surveyed by Reuters predicted that Saudi Arabia’s official selling prices for all crude grades destined for Asia in October would reach their highest point this year.
Meanwhile, the seizure of power by the military in Gabon on Wednesday raised concerns about potential disruptions in the country’s crude supplies, further tightening the market. Kpler ship-tracking data indicated that Gabon exported an average of 160,000 barrels daily to Asia from May to July.
Despite these developments, worries persisted about China’s mixed economic landscape as the world’s primary oil importer. In September, Chinese refiners will likely increase diesel exports to more than 1 million metric tons. This move came amid lucrative margins in overseas sales and anticipated additional export quotas from Beijing.
Andrew Lipow, president at Lipow Oil Associates in Houston, remarked, “The market’s interpretation is if they are exporting this much product, then things are not going so well with the Chinese economy.”
Ole Hansen, who is the head of commodity strategy at Saxo Bank, pointed out that while Saudi Arabia, Russia, and others have implemented production cuts, other exporters such as Venezuela and Iran are partially filling the gap. He cautioned, “Ongoing demand concerns may prevent prices from sustaining above $90.”