By Barani Krishnan
Investing.com - Looks like oil bulls' patience in awaiting better demand stats for crude may come off, though not right away.
The long-oil hedge funds and speculators who'd persistently defended the market in the face of non-stop crude builds since early March finally got their break Wednesday when the Energy Information Administration reported the first drawdown in crude stocks in four weeks.
U.S. West Texas Intermediatecrude settled down 29 cents, or 0.5%, at 63.79 per barrel by after the EIA said crude stockpiles fell by 1.4 million barrels last week, a tad higher than the 1.2 million-barrel drop forecast by the market. Crude inventories had built by roughly 17 million barrels in three previous weeks.
Brent crude, the London-based global benchmark for oil, finished the official trading session down 10 cents, or 0.1%, at $71.62.
Notwithstanding Wednesday's dip, WTI is up about 40% for the year while Brent has gained 33%.
The EIA also reported that gasoline inventories declined by 1.17 million barrels, compared to expectations for a draw of 2.13 million barrels.
Distillate stockpiles, however, dropped by just 0.36 million barrels, compared to forecasts for a decline of 0.85 million.
While the 1.4 million-barrel crude draw wasn't spectacular, it could put to rest some of the uncertainty that has dogged the market over the past few weeks and help oil longs make a fresh bid for $65 WTI, a target much talked about by bulls, but one they have found elusive so far.
Refinery runs also picked up, running at 86.4% of capacity versus the previous week's 87.7%, in a sign that gasoline-making was intensifying ahead of the peak U.S. summer driving season.
"Gasoline demand continues to be summer-like, while the overall refinery utilization rate remains subdued, below 90%, which is supportive," said John Kilduff, founding partner at New York energy hedge Again Capital.
But oil bears were already moving on from the report, speculating on how soaring crude prices might influence President Donald Trump in deciding on the renewals for Iranian sanction waivers that expire next month.
"With the forward curve remaining strong over the last couple of weeks we feel prices will remain firm until we see what the president decides to do with the upcoming Iran sanction exemptions," said Tariq Zahir, managing member at the oil-focused Tyche Capital Advisors fund in New York.
"If the Saudis continue to produce well under the levels they had agreed to at OPEC and if Venezuela continues losing production and Libya remains in a fluid situation with its civil war, we wouldn’t be surprised to see the president extending waivers even more this time on Iran sanctions to keep the market prices from flying," Zahir added.
Reuters oil columnist John Kemp said in a Wednesday article that high-level discussions between Riyadh and Washington over Iranian sanctions and production policy were likely to have begun already, noting that Trump spoke on the telephone with Saudi Crown Prince Mohammad bin Salman last week. The two discussed human rights and the need to maintain pressure on Iran, according to a statement from the White House.
Kemp speculated that the White House is likely to agree to scale back Iran sanctions waivers if Saudi Arabia commits to replacing the lost barrels at least one for one to leave the global production-consumption balance unchanged.