By Barani Krishnan
Investing.com - Crude prices slumped almost 2% on Thursday as top importer China announced plans to release oil reserves to reduce pressure on its refineries. A mixed U.S. inventory drawdown also added to oil’s downside.
London-traded Brent crude, the global benchmark for oil, meanwhile, settled at $7145 per barrel, down $1.15 cents, or 1.6%.
New York-traded West Texas Intermediate, the benchmark for U.S. oil, settled at $68.14 per barrel, down $1.16, or 1.7%.
China’s state reserves administration said it would release crude reserves to the market in phases via public auction to ease the pressure of high costs on domestic refiners.
““The oil market is in deficit but this China story could disrupt it staying in deficit for the rest of the year,” said analyst Ed Moya at online trading platform OANDA.
“WTI crude’s fundamentals were very bullish until the China news of releasing their reserves. Momentum selling could accelerate and WTI could target the $65 level.”
US crude oil inventory draws hit four-week lows last week and were less than a third of expected levels, data from the Energy Information Administration showed on Wednesday, as refinery closures from Hurricane Ida tripped up analysts’ projections.Crude stockpiles fell by 1.5 million barrels in the week to Sept. 3 to 423.9 million barrels, the EIA said in its Weekly Petroleum Status Report.
It was the smallest drawdown in U.S. crude stocks since the week ended Aug. 6, EIA historical data showed.
Analysts polled by U.S. media had expected a drawdown of 4.75 million barrels instead.
On the gasoline front, stocks fell by 7.2 million barrels in the week to 220 million barrels, the EIA said, compared with analysts' expectations for a 3.3 million-barrel drop. This was another storm-related anomaly as refiners’ inability to operate at optimum levels since the Aug. 29 hurricane led to less replenishment of motor fuel stockpiles.
Refineries operated at below 82% of their capacity last week, the EIA said. Operating levels are typically around 95 percent at this time of year.
Analysts were more accurate with their reading on inventories of distillates distillates, which include diesel and heating oil. These fell by 3.1 million barrels to 133.6 million barrels, not far from the anticipated drawdown of 3.5 million barrels, the EIA data showed.
Ida shut down more than 90% of gas production facilities on the US Gulf of Mexico prior to making its landfall. In the aftermath of the storm, some production remained shut and could take time to resume due to flooding and other carnage caused by the storm.