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U.S. crude oil futures fell to four-week lows Wednesday, as troubles in China’s property sector add to concerns over lackluster economic data from the world’s second-largest oil consumer, but a bigger than expected weekly drop in U.S. crude supplies help ease the price decline.
The weekly EIA report showed a bullish 6.1M-barrel decline in the headline number on U.S. crude oil inventories, compared to consensus expectations for a 2.8M-barrel draw, but investors also saw bearish signs in the report, showing domestic crude production rise to a fresh three-year high at 12.8M bbl/day.
Also, implied gasoline demand came in below 9M bbl/day for the sixth week in the past seven, a weak showing for the summer driving season.
Front-month Nymex crude (CL1:COM) for October delivery closed -0.9% to $78.89/bbl, its lowest settlement since July 26, and front-month October Brent crude (CO1:COM) finished -1% to $83.21/bbl, its lowest closed since August 2; it was the third straight decline for both benchmarks.
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The energy sector (XLE) was the only group to finish in negative territory, -0.2%.
“The rally in oil appears to have run out of steam for now,” ING analysts said. “China’s macro issues, along with a growing expectation that maybe the U.S. Fed is not done with its tightening cycle have weighed on oil more recently.”
Meanwhile, Iran has raised its production by ~400K bbl/day to 2.9M bbl/day, the highest since late 2018, the ING analysts said, and the Iran government said it aims to hit 3.4M bbl/day by the end of summer, just below its pre-sanctions pace of 3.8M bbl/day.
