U.S. Oil Ends Further Below $100 After Massive Gasoline Build

© Reuters.

By Barani Krishnan

AiVIF.com -- It’s an open secret in the oil market that reaction to U.S. inventory data is never done in a day; that it could go on until the following week’s numbers. That might be the case with the second straight weekly build in gasoline reported by the Energy Information Administration for last week.

After a 1% price drop in Wednesday’s initial reaction to the data — helped no doubt by bulls buying the dips in U.S. crude after its break below $100 — the trade reevaluated on Thursday the stockpile situation, which ​​represented the largest back-to-back gasoline build since the weeks ended January 7th and January 15th.

That two-week stretch in January led to a pile-up of almost 14 million barrels. The current build for the weeks to July 8th and 15th stands at just over 9 million barrels.

But with talk of demand destruction for fuel gathering pace by the day — gasoline at U.S. pumps averaged $4.44 per gallon on Thursday, down just 11% from the mid-June record-high of $5.01 — the bearish contingency in oil found momentum swinging its way. The inventory data showed last week’s pump demand for gasoline at 8.5 million barrels, down from the 9.3 million a year ago.

“Gasoline demand usually is quite strong during the U.S. mid-summer months,” said Stephen Innes of SPI Asset Management. “The situation remains volatile and will keep traders on edge.”

New York-traded West Texas Intermediate crude settled down $3.53, or 3.5%, at $96.35 per barrel, after an intraday low at $94.62. A week ago, WTI hit a near five-month low of $90.58.

London-traded Brent crude for September delivery settled down $3.06, or 2.8%, at $103.86 a barrel, after a session low at $101.53. The global crude benchmark hit a Feb. 25 low of $95.42 a week ago.

Oil prices also fell for reasons other than faltering gasoline demand.

Trading volumes in WTI have been thin of late, exacerbating moves either way, as traders attempted to square off the apparent weakening of energy demand on fears of a U.S recession with generally tighter supplies due to the loss of Russian barrels from the sanctions imposed on Moscow for its war on Ukraine.

But the global deficit in energy supply saw some relief on Thursday.

Flows through Russia's Nord Stream 1 natural gas pipeline, which runs under the Baltic Sea to Germany, partially resumed after being shut for maintenance on July 11, Reuters reported. The pipeline had already run on reduced volumes following a dispute sparked by Russia's invasion of Ukraine.

"The resumption of Nord Stream gas flows appears to be conjuring up images of a more conciliatory posture on the part of Russia regarding continued movement of crude and products into Europe in the coming weeks/month," Jim Ritterbusch of Ritterbusch and Associates said in remarks carried by Reuters.

But oil prices also came off their lows as the dollar resumed this week’s downtrend after the European Central Bank on Thursday joined many other central banks in raising interest rates, focusing on fighting runaway inflation rather than the economic downturn.

The Dollar Index, which pits the greenback against six major currencies, was at under 107 on Thursday, after piercing above 109 last week for its highest levels since December 2002 on bets of aggressive rate hikes by the Federal Reserve.