WionDrive News Desk 
Oil prices moved higher on Wednesday as WTI settled up 1.3 per cent at $83.88 along with US gasoline prices driven by the favourable EIA weekly report showing large draws in commercial stocks and gasoline demand rose to 7.5 month high, also supported by weakening dollar index, which fell to three weeks low on disappointing US economic data released on Wednesday. While American Automobile Association has forecast that travel during the holiday period will be 5.2 per cent higher than in 2023, with car travel up 4.8 per cent have also supported crude oil rally earlier this week.
A larger drawdown in inventories was already priced in by the market as crude oil advanced 2.5 per cent ahead of the inventory data through the week, Wednesday’s weekly EIA report was mainly bullish for crude prices.
EIA crude inventories sank -12.16 million bbl, gasoline supplies fell -2.21 million bbl, as US gasoline demand in the week ended Jun 28 rose +5.1 per cent w/w to 9.424 million bpd, a 7-1/2 month high.
On the positive side, crude supplies at Cushing, the delivery point for WTI futures, rose +345,000 bbl. US crude oil production in the week ending June 28 was unchanged w/w at 13.2 million bpd, just below the recent record high of 13.3 million bpd.
The US economy is visibly slowing down as the services PMI showed steepest contraction in 4 year during June, the Jun ISM services index fell -5.0 to 48.8, weaker than expectations of 52.7, US weekly continuing claims rose +26,000 to a 2-1/2 year high of 1.858 million, showing a weaker labour market than expectations of 1.840 million.
Also, May factory orders unexpectedly fell -0.5 per cent m/m, weaker than expectations of +0.2 per cent m/m and the biggest decline in 4 months. Wednesday’s US economic news was weaker than expected and bearish for energy demand and crude prices.
Geo-political risk
Crude oil is carrying embedded geo-political risk premiums of around $2/$3/b on renewed rift in the middle east region as due to concern about the escalation of the Hamas-Israel conflict.
Israel’s military continues to conduct operations in Gaza, and there is also concern that the war might spread to Hezbollah in Lebanon or even to a direct conflict with Iran as hostilities escalate between Israel and Hezbollah.
Meanwhile, ongoing attacks on commercial shipping in the Red Sea by Iran-backed Houthi rebels have forced shippers to divert shipments around the southern tip of Africa instead of going through the Red Sea, disrupting global crude oil supplies.
OPEC+ June Survey
Ther early survey for June production from Reuters showed OPECs output rose for a second consecutive month in June as group produced 26.70 mbpd, which weighed on oil prices. Higher supply from Nigeria and Iran offset the impact of voluntary supply cuts by other members and the wider OPEC+ alliance. OPEC pumped about 280,000 bpd more than the implied target for the nine members covered by supply cut agreements, with Iraq still accounting for the bulk of the excess.
