Crude settles higher despite modest US inventory draw, call for more OPEC+ output

A late session rally saw oil futures settle higher Aug. 11 despite a tepid US inventory report and calls from the White House for the OPEC+ group to raise output.

Front-month September WTI settled 96 cents higher at $69.25/b, and ICE October Brent moved up 81 cents to $71.44/b.

Total US commercial crude stocks declined 450,000 barrels in the week ended Aug. 6 to 438.78 million barrels, the US Energy Information Administration said Aug. 11, leaving the deficit to the five-year average steady from the week prior at around 6.1%.

The draw came up short of market expectations. American Petroleum Institute data released late Aug. 10 showed an 816,000 barrel draw over the period, while analysts surveyed by S&P Global Platts on Aug. 9 called for a 600,000-barrel decline.

"Despite a late-day move higher, the modest oil inventory draw still leaves crude vulnerable to a drift lower toward support should delta variant demand worries become more widespread," TD Securities analysts said in a note. TD Securities added, "significant upside is still in the cards once the negative impact of the delta variant dissipates, which could then see crude test recent highs once again."

But there were still glimmers of bullish indicators in the EIA report. Inventories at the NYMEX light crude contract delivery point of Cushing, Oklahoma, fell for an eighth-straight week, declining 330,000 barrels to 34.58 million barrels. Cushing stocks were last lower during the week ended Nov. 2, 2018.

Total US refinery net crude inputs climbed 2% on the week to 16.2 million b/d as refinery utilization averaged 91.8% of capacity, a 0.5 percentage point uptick from the week prior. Refinery crude demand was the strongest since the week ended June 25 but was still nearly 4% below normal for this time of year.

Front-month NYMEX September RBOB settled 3.43 cents higher Aug. 11 at $2.3022/gal, while September ULSD climbed 2.56 cents to $2.1058/gal.

US gasoline inventories declined 1.4 million barrels to 227.47 million barrels, putting stocks at the lowest since the week ended Nov. 6, 2020, and 3.7% behind the five-year average. Gasoline stocks are now more than 6% behind the five-year average in both the Midwest and USAC regions, while USGC inventories stand around 1% below normal.

The ICE New York Harbor RBOB crack versus Brent climbed to $18.89/b in afternoon trading Aug. 11, on pace for the strongest close since July 29.

White House calls for more OPEC+ supply

Oil prices were holding lower ahead of the EIA release after the Biden administration urged OPEC+ producers to increase oil supply to ease crude prices and blunt the domestic pressure of high gasoline costs.

National Security Advisor Jake Sullivan said Aug. 11 in a statement that current higher gasoline prices "if left unchecked, risk harming the ongoing global recovery." He pointed to crude oil futures being higher than pre-pandemic levels.

"While OPEC+ recently agreed to production increases, these increases will not fully offset previous production cuts that OPEC+ imposed during the pandemic until well into 2022," Sullivan said. "At a critical moment in the global recovery, this is simply not enough."

US retail gasoline prices averaged $3.14/gal in July, the highest monthly average since October 2014, EIA said. EIA said the prices reflect higher crude prices and rising wholesale gasoline margins, amid relatively low gasoline stocks.

"The belief that higher prices are harming the recovery and the current pace [of OPEC+ production increases] isn't sufficient is behind the push," OANDA senior market analyst Craig Erlam said in a note. "The oil group is no stranger to the White House trying to interfere in its decision making process, with President Trump a constant critic of them during his term. While the comments earlier appear less confrontational, it's clear that pressure is going to ramp up."