August 27, 2023 [Reuters] – Oil prices dipped 1% on Wednesday as demand woes stemming from a build in U.S. gasoline stocks and weak manufacturing data globally outweighed optimism around a larger-than-expected drop in U.S. crude stocks.
Brent crude was down 82 cents, or 0.98%, at $83.21 a barrel, bouncing off a 2.5% decline earlier in the session. U.S. West Texas Intermediate crude was down 75 cents, or 0.9%, at $78.89. At the session low it was down 3.4%.
U.S. gasoline stocks climbed 1.5 million barrels last week, compared with analysts estimates for a 888,000 barrel drop.
Meanwhile, U.S. crude inventories (USOILC=ECI) fell by 6.1 million barrels in the week to Aug. 18, the Energy Information Administration said, helped by strong refining activity and high levels of exports. Analysts had expected a 2.8 million-barrel drop.
“The EIA data was a mixed bag,” said John Kilduff, partner at Again Capital.
While refiners continue to run at a high rate and snap up oil inventories, fuel demand hasn’t been very strong due to tough economic conditions, Kilduff added.
Manufacturing data from a host of purchasing managers’ index (PMI) surveys painted a grim picture of the health of economies across the globe.
Japan reported shrinking factory activity for a third straight month in August. Euro zone business activity also declined more than expected, particularly in Germany. Britain’s economy looked looks set to shrink in the current quarter, in danger of falling into recession.
U.S. business activity approached the stagnation point in August, with growth at its weakest since February.
Markets are also looking for hints on the outlook for interest rates when Federal Reserve officials and policymakers from the European Central Bank (ECB), the Bank of England and the Bank of Japan head to Jackson Hole, Wyoming, on Thursday.
Talk has shifted to keeping interest rates around where they are now – but for longer than perhaps previously estimated – rather than raising them further.
On the supply side, Iran’s crude oil output will reach 3.4 million barrels per day (bpd) by the end of September, the country’s oil minister was quoted as saying by state media, even though U.S. sanctions remain in place.
Saudi Arabia will likely roll over a voluntary oil cut of 1 million barrels per day for a third consecutive month into October, five analysts said, amid uncertainty about supplies and as the kingdom targets drawing down global inventories further.
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