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Crude Oil Rallies 4% on Bigger-Than-Expected US Supply Drop

Summary:
Crude oil futures are rallying as much as 4% in the middle of the trading week after the US government reported a bigger-than-expected decline in domestic inventories. With mostly positive data coming, investors are confident that the recovery is going well, although there are concerns about the resurgence in COVID-19 cases. Overall, oil is joining the broader market rally on Wednesday. September West Texas Intermediate (WTI) crude futures advanced .50, or 3.6%, to .20 per ounce at 15:46 GMT on Wednesday on the New York Mercantile Exchange. After a commendable July, US crude prices are looking to add to the momentum in August, jumping around 3% so far this week. Year-to-date, oil is down 29%. Brent, the international benchmark for oil prices, is also rallying midweek. October Brent

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Crude oil futures are rallying as much as 4% in the middle of the trading week after the US government reported a bigger-than-expected decline in domestic inventories. With mostly positive data coming, investors are confident that the recovery is going well, although there are concerns about the resurgence in COVID-19 cases. Overall, oil is joining the broader market rally on Wednesday.

September West Texas Intermediate (WTI) crude futures advanced $1.50, or 3.6%, to $43.20 per ounce at 15:46 GMT on Wednesday on the New York Mercantile Exchange. After a commendable July, US crude prices are looking to add to the momentum in August, jumping around 3% so far this week. Year-to-date, oil is down 29%.

Brent, the international benchmark for oil prices, is also rallying midweek. October Brent crude futures rose $1.48, or 3.33%, to $45.91 a barrel on London’s ICE Futures exchange. Brent is already up 4% this week, paring its YTD drop to about 30%.

According to the US Energy Information Administration (EIA), domestic stockpiles decreased 7.373 million barrels for the week ending July 31, beating market forecasts of a little more than three million. Inventories at the Cushing, Oklahoma storage facility added 530,000 barrels, down from the 1.309 million increase in the previous week.

Gasoline supplies jumped 419,000 barrels, while distillate stockpiles surged 1.592 million barrels.

Last week, the Baker Hughes oil rig count dipped to just 180, down from 181 in the previous week. The relatively flatlining of the total rig count has left analysts with the impression that US oil and gas firms are beginning to restart operations to take advantage of higher prices. In the US, companies can either break even or become profitable if prices range between $40 and $50 per barrel.

Investors seem undeterred by the Organization of the Petroleum Exporting Countries (OPEC) and its allies – OPEC+ – moving ahead with tapering the output curbs that started on Sunday. OPEC and its oil-producing partners vowed to ease the production cuts from 9.7 million barrels per day (bpd) to 7.7 million bpd this month until the end of the year. So, this means around 1.5 million and two million bpd of oil will be added to global supplies over the next four months.

Crude markets are partaking in the broader market pop on Wednesday as the leading indexes were in the green, as well as the metal commodities.

In other energy markets, September natural gas futures picked up $0.015, or 0.46%, to $2.203 per million British thermal units (btu). September gasoline futures added $0.0309, or 2.54%, to $1.2445 a gallon. September heating oil futures tacked on $0.033, or 2.62%, to $1.2914 per gallon.

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Andrew Moran
I am a full-time professional writer. Prior to my self-employment, I worked as a reporter for Digital Journal covering the politics beat and The Toronto Times reporting on the city’s entertainment scene. I currently write mostly about business, marketing and finance

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