Oil Halts Slump After Outsized Drop in U.S Crude Inventories
(Bloomberg) -- Crude futures halted the longest slide in five months after a larger-than-expected drop in U.S. oil inventories.
West Texas Intermediate ticked higher by 16 cents after a four-day losing streak stalled this year’s crude rally. The advance was tempered by a surprise jump in gasoline stockpiles that signaled fuel demand may be under threat as Covid-19’s delta variant menaces the economic recovery.
Domestic crude inventories declined by 3.23 million barrels last week while gasoline stockpiles inventories jumped by 696,000 barrels, the first increase in more than a month, according to data released by the Energy Information Administration on Wednesday. A gauge of fuel demand fell for a second week.
“Investors are still skittish as economic indicators showing delta’s blow to demand comes in,” said Matt Sallee, who helps manage about $8 billion at Tortoise. “They’re still deciding whether negative signals are just a blip or not.”

The report followed an industry-funded American Petroleum Institute tally on Tuesday that saw a 1.16-million decline in crude inventories with supplies at the Cushing, Oklahoma, hub dropping by 1.74 million. The group also pegged the drop in gasoline stockpiles at almost 2 million.
To follow the TOPLive blog on the weekly EIA report here in real time, click here.
Crude surged during the first half of the year as vaccination rollouts increased confidence about the pace of economic recovery. But the rally was knocked off course in recent weeks amid signals in the U.S. and China suggesting the spread of Covid-19’s delta variant may be hurting energy demand.
There were also more positive signs emerging from the shape of the oil futures curve. Brent’s nearest timespread widened to a backwardation of 48 cents Wednesday. That structure — where the nearest contracts are more expensive than those at later dates — has started to indicate a stronger market in recent days, after slumping to an 11-week low on Monday.
“The $100-a-barrel predictions we saw earlier in the summer were rendered completely inaccurate as Asian demand continues to be muted,” said Jay Hatfield, chief executive officer of Infrastructure Capital Management. “Delta notwithstanding, an overall stockpile decline indicates some positive long-term fundamentals for oil.”
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