Crude complex rises on bullish EIA data; ICE Brent at $77.64/b, WTI at $69.91/b

Crude oil futures moved up Thursday morning, as the market focused on the bullish news of a draw in US crude oil inventories reported by the Energy Information Administration (EIA) on Wednesday, while US domestic gasoline demand also provided some support, despite higher prices, analysts said. More globally, market participants continue to take a wait-and-see approach towards Iran’s threat to withdraw from its nuclear deal with world powers.

At 1130 GMT, ICE October Brent crude futures were up 50 cents/b from Wednesday’s settle at $77.64/b, while the NYMEX October light sweet crude contract rose 40 cents/b to $69.91/b. US crude oil inventories fell 2.57 million barrels for the week ended August 24, EIA data showed. This was in contrast to the 38,000 barrel build reported by the American Petroleum Institute, but in line with analysts’ expectations of a 1 million barrel crude drawdown, a survey conducted by S&P Global Platts Monday showed.

Total US gasoline inventories fell 1.61 million barrels last week to 222.8 million barrels, while distillate stocks fell 837,000 barrels to 130 million barrels, EIA reported. US domestic demand for oil and products was the driving force behind the draw, analysts said. “Not only did stocks of crude oil, gasoline and distillates all fall considerably more sharply than expected…this time it was not imports that were chiefly responsible,” Commerzbank analysts said in a note Thursday.

“It appears that the higher gasoline prices have not spoilt the pleasure of driving for US car drivers at least, the Federal Highway Administration having noted an increase in ‘miles driven’ of 5.2 billion or 0.3% year-on-year in the first half of the year. This is particularly remarkable given that Monday saw an average gasoline price (according to the EIA) of $2.83 per gallon — its highest level since 2004 in the week before the long Labor Day weekend,” Commerzbank added.

On Wednesday, Iran’s Supreme Leader Ayatollah Ali Khamenei threatened to withdraw from the country’s nuclear agreement, saying Tehran would not negotiate with US officials for a new deal. An Iranian withdrawal from the accord, called the Joint Comprehensive Plan of Action, would likely lead to the EU re-imposing its sanctions on Iran, including bans on European purchases of Iranian oil, if Tehran resumes its uranium enrichment program. However, due to the interconnected global oil markets, most European customers have already begun cutting back on purchases. Analysts expect the US sanctions will eventually shut in 1 million b/d or more of Iranian exports, although countries such as China have already said they will continue to buy Iranian oil.

“People are still repositioning books ahead of Iran sanctions…but we’re probably going to stay in this [pricing range] at the moment, and I think Iran has been priced in for the most part — it’s not getting as much scary headlines as it did last time around, the oil is still going to flow,” said Michael Poulson, senior oil manager at Global Risk Management. Platts