Oil futures rose on Wednesday, defying the broader weakness seen across financial markets. Investors continue to focus on the tight supplies of crude oil.
Price Action
- West Texas Intermediate crude for November delivery rose by $1.26, or 1.4%, to $91.65 a barrel on the New York Mercantile Exchange.
- November Brent crude, the global benchmark, was up 96 cents, or 1%, at $94.92 a barrel on ICE Futures Europe.
Market Drivers
Despite pressure on other risky assets, oil rebounded from early weakness on Tuesday to finish higher. This comes as major indices like the Dow Jones Industrial Average and the S&P 500 posted their lowest finishes since early June.
Crude oil also remained firm despite the strength in the U.S. dollar, which hit a 10-month high on Tuesday.
According to Warren Patterson and Ewa Manthey, commodity strategists at ING, tightening fundamentals are driving the market at the moment, although external influences are providing some headwinds to the oil market.
The American Petroleum Institute reported that U.S. crude inventories rose by 1.59 million barrels last week, while gasoline stocks fell by 70,000 barrels and distillate inventories dropped by 1.7 million barrels. Notably, inventories at Cushing, Oklahoma fell by 828,000 barrels.
The tightening supplies at Cushing have contributed to backwardation in the market, with the front-month WTI contract trading at a premium of around $1.90 to the December contract.
The Energy Information Administration is set to release more closely followed inventory data on Wednesday morning. Analysts surveyed by S&P Global Commodity Insights expect U.S. crude stocks to show a fall of 2.2 million barrels, with gasoline and distillate stocks also expected to decrease. Additionally, Cushing is expected to see a 1 million barrel draw in crude supplies.