Crude settles higher on tighter US crude stocks, improved demand outlooks

Crude oil futures pushed to six-week highs Sept. 15 on the back of a larger-than-expected draw in US inventories and improving global demand outlooks.

NYMEX October WTI settled $2.25 higher at $72.61/b and ICE November Brent was up $1.86 at the close of trading to settle at $75.46/b.

Total US commercial crude stocks fell 6.42 million barrels to 417.45 million barrels in the week ended Sept. 10, Energy Information Administration data showed Sept. 15. The draw put stockpiles 7.5% behind the five-year average for this time of year and at the lowest outright since September 2019.

The draw was largely the result of lingering US Gulf of Mexico production outages following Houston Ida, which made landfall near Port Fourchon, Louisiana, Aug. 29 as a Category 4 storm.

Total US crude output averaged 10.1 million b/d in the week ended Sept. 10, the EIA said, up 100,000 b/d from the week prior but still down 1.4 million b/d from prestorm levels.

"Risks to the upside for crude prices are not going away," OANDA senior market analyst Ed Moya said. "Oil's rally is nowhere near over as both demand and supply drivers are still mostly bullish: further delays in making progress with the Iran nuclear deal, a cold winter, and further production disruptions from a very active hurricane season."

It was the highest settle for WTI and Brent since July 30, when the front-month contracts finished at $73.95/b and $76.33/b, respectively.

Better-than-expected US manufacturing data was also supporting prices early Sept. 14. The New York Federal Reserve's Empire State business conditions index reached 34.3 in September, up 16 points from the month prior and well above market expectations. The sharp rise in the index suggests the manufacturing sector remains optimistic regarding the continued economic recovery even as the country struggles to contain the latest pandemic surge.

"Given the larger-than-expected reduction in US and global production estimates and the upgrade of demand projections by agencies such as the IEA, the crude market will likely continue to get support from enthusiastic bullish money managers," TD Securities head of commodity strategy Bart Melek said in a note.

The International Energy Agency on Sept. 14 raised its 2022 oil demand growth estimate by 100,000 b/d to 3.2 million b/d, a day after OPEC hiked its own forecast of 2022 global demand growth 900,000 b/d to 4.15 million b/d.

NYMEX October RBOB settled 3.42 cents higher at $2.2066/gal and October ULSD climbed 4.40 cents to $2.2053/gal.

Refined product futures, while still up on the day, pulled back from session highs after EIA showed weaker-than-expected declines in both gasoline and distillate inventories.

Total gasoline stocks were down 1.86 million barrels over the period to 218.14 million barrels, while distillate stocks declined 1.69 million barrels to 131.9 million barrels.

The gasoline inventory slide came despite implied demand falling 7.5% to 8.89 million b/d, the weakest since the week ended June 4.

Gulf of Mexico shut-ins extend

Less than 30% of US Gulf of Mexico crude production remained offline Sept. 15 in the aftermath of hurricanes Ida and Nicholas, although the delayed restoration of onshore facilities continued to slow the return to normalcy in offshore operations.

After 95% of US Gulf oil and gas production was shut in near the end of August as Ida made a Louisiana landfall, only 537,193 b/d of crude, or 29.5%, remained offline Sept. 15, according to the US Bureau of Safety and Environmental Enforcement.

Category 1 Nicholas, which hit the Texas Gulf Coast on Sept. 13, had a much more modest impact on the Western Gulf and on slowing restoration activities.

Shell confirmed Sept. 15 that it is awaiting downstream facilities to come back online before restoring production to its 100,000 b/d of oil equivalent Perdido platform in the Western Gulf after Nicholas' heavy winds.

Shell is awaiting the restart of Williams Cos. transportation and processing facilities after Nicholas, according to a source familiar with operations. Williams did not respond to a request for comment Sept. 15.