Oil futures rose Thursday, with both U.S. and global benchmark crude marking another settlement at the highest in over two weeks, a day after U.S. government data revealed a weekly drawdown in domestic crude, gasoline and distillate inventories.

The across-the-board supply declines reported by the Energy Information Administration on Wednesday “suggest demand levels remain strong, despite rising concerns around the rapid spread of the COVID-19 delta variant, both in the U.S. and abroad,” said Robbie Fraser, global research & analytics manager at Schneider Electric, in a daily note.

West Texas Intermediate crude for September delivery


rose $1.23, or 1.7%, to settle at $73.62 a barrel on the New York Mercantile Exchange.

The front-month global benchmark contract, September Brent crude
was up $1.31, or nearly 1.8%, at $76.05 a barrel on ICE Futures Europe, ahead of its expiration at the end of Friday’s session.

Based on the front months, WTI and Brent crude posted their highest settlements since July 13 and largest one-day dollar and percentage gains since July 22, according to Dow Jones Market data.

October Brent

the most-active contract, added $1.23, or 1.7%, to settle at $75.10 a barrel.

The EIA said Wednesday that U.S. crude inventories fell by 4.1 million barrels for the week ended July 23, marking the ninth weekly decline in 10 weeks.

In addition, crude inventories in Cushing, Oklahoma, fell by 1.27 million barrels, leaving inventories at the delivery hub for WTI futures at their lowest since January 2020, noted Warren Patterson, head of commodities strategy at ING, in a note.

That contributed to a strengthening of the spread between the nearby September WTI futures contract and the October contract
he noted. The front-month contract traded at a premium of around 60 cents a barrel to October.

The EIA data on Wednesday wasn’t all positive though.

Crude-oil processing fell for a fourth consecutive week, coming in below 16 million barrels a day for the first time since the end of May, noted Carsten Fritsch, analyst at Commerzbank.

“It is therefore a good 1 million barrels per day under the average of the years 2015-19. This does not exactly point to robust demand from refineries,” he said.

Still, the EIA also reported that gasoline supplies fell 2.3 million barrels last week and pegged the amount of motor gasoline supplied, a proxy for demand, at an average 9.5 million barrels a day, up 9.1% from the same time a year ago.

On Nymex Thursday, August gasoline RBQ21 tacked on 1.9% to $2.35 a gallon, the highest front-month finish since October 2014. August heating oil HOQ21 rose by nearly 1.6% to $2.19 a gallon for the highest settlement since November 2018. The August contracts expire at the end of Friday’s trading session.

The subdued U.S. refinery runs make sense given the COVID concerns, but “when we start to see broader delta fears being to subside…we should see that metric ramp back up and underscore the healthy state of consumer demand,” analysts at Sevens Report Research wrote in Thursday’s newsletter.

On the other hand, more negative COVID developments could derail the rally and send oil prices back towards the $50s, they said. So for now, given the uncertainties, WTI is likely to remain rangebound between the mid-$60s and mid-$70s “until we gain more clarity on the latest virus trends.”

Meanwhile, natural-gas futures extended their gains after the EIA reported on Thursday that domestic supplies of natural gas rose by 36 billion cubic feet for the week ended July 23. On average, analysts forecast an increase of 40 billion cubic feet, according to a poll conducted by S&P Global Platts.

September natural gas

rose 9 cents, or 2.3%, to $4.06 per million British thermal units.

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