U.S. oil inventories drop in line with expectations

WTI rose over the $108 mark on Thursday as the Energy Information Administration said in its weekly report that U.S. crude oil and gasoline inventories fell while distillate fuel supplies gained in the week ended August 30 generally in line with analysts projections.

On the New York Mercantile Exchange, WTI crude for October settlement traded at $108.44 per barrel at 15:27 GMT, up 1.13% on the day. Prices rose to a new days high of $108.52 minutes after the data was released, while days low stood at $107.15 per barrel. Futures slipped 0.9% on Wednesday and extended their weekly advance to 0.8% following Thursdays surge.

Meanwhile on the ICE, Brent oil for October delivery erased previous daily losses and rose to $115.28 a barrel at 15:28 GMT, up 0.32% on the day. Futures held in days range between $115.55 and $114.32 per barrel. The European benchmark fell by 0.5% on Wednesday but extended its weekly advance to 1.1% after Thursdays gains.

The Energy Information Administration reported on Thursday that U.S. crude inventories declined by 1.84 million barrels to 360.2 million last week and remained near the upper limit of the average range for this time of the year. Refineries utilization rose by 0.4% to 91.7% last week. Gasoline production decreased, while distillate fuel processing increased, averaging 9.1 million and 5.0 million barrels per day, respectively.

The government agency also reported that U.S. gasoline stockpiles fell by 1.8 million barrels last week and remained near the upper limit of the average range for this time of the year. Meanwhile, distillate fuel inventories rose by 0.5 million barrels and were near the lower limit of the average range.

The industry-funded American Petroleum Institute reported on Wednesday that U.S. crude stockpiles fell by 4.16 million barrels in the week ended August 30. Gasoline inventories decreased by 387 000 barrels, while distillate fuel supplies dropped by 109 000 barrels. API’s data however is considered as less reliable than EIA’s statistics as it is based on voluntary information from operators of refineries, pipelines and bulk terminals.

The Energy Information Administrations statistics generally were in line with investors expectations. According to a Bloomberg survey of analysts, the report should have shown that crude reserves fell by 2 million barrels last week, while gasoline inventories were expected to have dropped by 700 000 barrels. Distillate fuel supplies were supposed to have increased by 600 000 barrels.

Upbeat U.S. data

Prices remained higher throughout the day as upbeat U.S. data boosted demand prospects in the worlds top consumer. In the medium-term however, positive economic readings imply future pressure on the market as a consistent economic recovery and robust labor market are Feds main requirements to begin tapering its Quantitative Easing program, which is already expected by many to begin in September. An exit from the stimulus would strengthen the dollar and push dollar-priced raw materials down due to the inverse relation between the two.

Payrolls processor ADP (Automatic Data Processing) reported on Thursday that the U.S. private sector created 176 000 jobs in August, less than last month, and underperformed expectations for a drop to 182 000. July’s reading was revised downward to 198 000 from the initial 200 000 reported. Analysts however said that the data was good enough to expect that Friday’s non-farm payrolls will mark an improvement.

Meanwhile, a separate report by the U.S. Labor Department showed that fewer people than projected filed for initial unemployment payments in the week ended August 31. The government agency reported that last week’s Initial Jobless Claims fell to 323 000, near a five-year low, outperforming expectations for a drop to 330 000. The preceding period’s reading received an upward revision of 1 000 claims to 332 000.

The four-week moving average, which smooths out week-to-week volatility, fell to pre-recession levels. The indicator slipped by 3 000 to 328 500 claims filed, marking the lowest level since October 2007. Although this report has no direct connection to Friday’s non-farm payrolls, its positive readings reinforce positive sentiment for the labor market.

In a separate report, the Institute for Supply Management said the U.S. service sector marked a major improvement in August. The institute’s ISM Non-Manufacturing Composite index confounded analysts’ expectations for a retreat from last month’s reading and surged to 58.6 in August, the strongest reading since December 2005. Economists expected a fall to 55.0 from July’s 56.0 reading.