NEW YORK: Oil prices slipped on Wednesday, after US government data showed lower gasoline demand during the peak summer driving season and as interest rate hikes by central banks to fight inflation fed fears the economy could slow, cutting energy demand.
However, prices pared losses during the session after TC Energy said that the Keystone pipeline, one of Canada’s major oil export arteries, was operating at reduced rates for a third day on Wednesday. Repairs continued on a third-party power facility in South Dakota, prompting concerns about tighter supplies.
Brent crude prices for September fell 42 cents to $106.93 a barrel by 12:44 p.m. EDT (1644 GMT). US West Texas Intermediate (WTI) crude for August fell 2 cents to $104.20 a barrel. The WTI contract expires on Wednesday.
The more active September WTI contract was at $100.20 a barrel, down 54 cents.
US gasoline inventories rose 3.5 million barrels last week, government data showed, far exceeding analysts’ forecasts in a Reuters poll for a 71,000-barrel rise.
Product supplied of gasoline - a proxy for demand - was about 8.5 million barrels per day, or about 7.6% lower than the same time a year ago, the data showed.
“Gasoline demand is subpar to say the least,” said John Kilduff, partner at Again Capital LLC in New York. “Certainly these high gas prices have undermined consumer confidence.” Americans were shocked in June as pump prices climbed to a record of over $5 per gallon.
Meanwhile, US crude inventories fell by 446,000 barrels last week, data showed, compared with analysts’ expectations for a 1.4 million-barrel rise.? Oil prices have been extremely volatile, caught in a tug-of-war between supply fears caused by Western sanctions on Russia and worries that the fight against inflation could weaken the global economy and cut demand.
On Friday, open interest in New York Mercantile Exchange futures fell to its lowest since September 2015 as concerns that the Federal Reserve will keep raising US interest rates led investors to cut exposure to risky assets.
Analysts expect oil supply tightness to keep supporting prices while US shale oil production expands at a modest pace.
“With little room for OPEC+ to increase production, the oil market will struggle to balance out in the coming months, thereby propping up prices,” said Stephen Brennock of oil broker PVM.
Limited supplies have kept Brent above $105 a barrel and prompt Brent inter-month spreads in wide backwardation at over $4.40 a barrel. In a backwardated market, front-month prices are higher than those in future months.
Comments
Comments are closed.