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Crude oil futures eked out small gains Wednesday despite a bearish U.S. inventories report that included surprisingly large crude and gasoline stock builds.
The U.S. Energy Information Administration said domestic crude stocks increased by 3.6M barrels last week, compared to expectations for a drawdown.
Analysts viewed the 417K bbl/day decline in U.S. gasoline demand to 8.9M bbl/day as the weakest part of the report.
“Gasoline disappointed greatly today, posting a build of 2.7M barrels after last week’s first draw of the summer driving season,” Mizuho’s Robert Yawger said, according to Dow Jones. “Summer driving season is gasoline’s time to shine and drag the rest of the oil patch along for the ride, [but] that is not happening.”
However, “given the expected stocking up at gas stations ahead of the Independence Day long weekend, next week’s report should show a solid rebound in implied demand,” Matt Smith, head U.S. analyst at Kpler, told Marketwatch.
Front-month Nymex crude (CL1:COM) for August delivery ended +0.1% to $80.90/bbl, and front-month August Brent crude (CO1:COM) finished +0.3% to $85.25/bbl.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
U.S. oil production will turn lower if corporate M&A activity sweeping the shale sector is prolonged, according to a Federal Reserve Bank of Dallas survey.
More than 50% of oil executives told the Dallas Fed they would expect lower domestic crude output if the consolidation trend continues for five years.
“Consolidation by E&P firms has curtailed investment in exploration,” according to one unidentified executive in the survey, as the shale sector’s $250B in recent takeovers make it less likely the U.S. will surprise the oil market like it did with last year’s unexpected 1M bbl/day production increase.