Gasoline futures dropped nearly 6% on Wednesday, following the restart of a key refinery and an unexpected increase in U.S. supplies. Futures prices for oil fell along with them despite data showing a weekly decline in crude inventories. Investors also remained cautious amid volatile financial markets and continued uncertainty over China’s growth outlook, though oil had managed to find some support earlier Wednesday from China’s recent easing measures.
October West Texas Intermediate crude shed 71 cents, or 1.8%, to settle at $38.60 a barrel on the New York Mercantile Exchange, after trading as high as $39.86. October Brent crude LCOV5, +0.97% on London’s ICE Futures exchange fell 7 cents, or 0.2%, to $43.14 a barrel.
Early Wednesday, the U.S. Energy Information Administration reported that crude stockpiles fell 5.5 million barrels for the week ended Aug. 21. Analysts polled by Platts had forecast a rise of 1.9 million barrels, but the American Petroleum Institute Tuesday said supplies dropped 7.3 million barrels, according to sources. John Macaluso, an analyst at Tyche Capital Advisors said that despite a large draw in oil inventories, “the low’s have yet to be tested and [we] expect further weakness through the week.” The biggest moves on Nymex Wednesday, however, came from gasoline futures. September gasoline dropped 8.4 cents, or 5.8%, to $1.355 a gallon. Gasoline supplies rose by 1.7 million barrels, the EIA said, contrary to the analyst forecast for a 1.4 million-barrel decline, according to a Platts survey. Distillate stockpiles, which include heating oil, climbed 1.4 million barrels last week, about double what analysts were expecting.
September heating oil fell 1.4 cents, or 1%, to $1.381 a gallon on Nymex. Adding pressure to gasoline prices, BP said late Tuesday that it has restarted a large crude distillation unit at its Whiting, Ind., refinery that had been shut down since Aug. 8 for repair work and that the restart is gradually increasing the refinery’s fuel production. Thomas Pugh, commodities economist at Capital Economics, noted that more unexpected and planned refinery outages over the next few months are likely to mean that crude inputs to refineries will continue to fall. That raises the potential for higher crude supplies. Even so, Pugh said the bigger picture is still one of “strong demand for gasoline and falling oil output, which should give some support to prices over the rest of the year.”