COM - Oil prices plummet despite huge drop in crude inventories

2023-08-02 18:45:32 ET

U.S. crude oil futures fell Wednesday by the most in more than a month, as a record drop in crude inventories was not enough to overcome risk-off investor sentiment, as financial markets fell broadly after Fitch downgraded the U.S. credit rating to AA+ from AAA.

Treasury yields rose broadly as the Treasury Department detailed plans to increase supply, and rising debt yields in turn lifted the dollar, with the U.S. Dollar Index gaining 0.3%.

Front-month Nymex crude ( CL1:COM ) for September delivery finished -2.3% to $79.49/bbl, and October Brent crude ( CO1:COM ) closed -2% to $83.20/bbl, with both registering their largest one-day percentage declines since June 27.

Also, U.S. front-month natural gas ( NG1:COM ) settled -3.2% to $2.477/MMBtu, also the biggest drop since June 27.

ETFs: ( XLE ), ( NYSEARCA: USO ), ( NBO ), ( UCO ), ( SCO ), ( DBO ), ( USL ), ( DRIP ), ( GUSH ), ( USOI ), ( NRGU ), ( UNG ), ( UGAZF ), ( BOIL ), ( KOLD ), ( UNL ), ( FCG )

The Energy Information Administration said U.S. crude inventories fell last week by 17M barrels , the largest drop in U.S. crude stockpiles according to records dating back to 1982.

U.S. inventories are now at the lowest since January, which should be welcome news for oil bulls who have been expecting tighter balances, but the reasons for the big drop - robust crude exports of 5.3M bbl/day and strong refinery runs - did not impress Kpler oil analyst Matt Smith.

"This is very much a timing issue: Peak summer refining activity has coincided with very strong end-of-month exports, and draws of such magnitude should not be expected going forward ," Smith said.

The American Petroleum Institute already had reported a 15.4M-barrel drop in U.S. crude inventories, which Smith said set up "a case of buying the rumor and selling the fact for WTI."

The U.S. government pulled an offer to buy 6M barrels of oil for the Strategic Petroleum Reserve, which also helped push prices lower.

More analysis on oil and gas:

• XLE: The Oil And Gas Shortage Is About To Return With Force
• XLE: The Rally Is Just Getting Started - Don't Exit Now
• Natural Gas Is Sitting In The Comfort Zone

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