Oil prices rise more than 1% as big drop in U.S. crude, gasoline stocks signals uptick in demand

Crude oil futures gained more than 1% Wednesday as a large drop in U.S. stockpiles signaled an uptick in demand ahead of the Fourth of July.

U.S. crude oil inventories fell by 12.2 million barrels last week, according to the Energy Information Administration. Gasoline stockpiles declined by 2.2 million barrels.

“Both gasoline and distillates also showed draws despite higher refinery runs, with implied demand higher for both—particularly for gasoline—as gas stations stocked up ahead of the Independence Day holiday weekend,” said Matt Smith, lead oil analyst at Kpler.

Here are Wednesday’s closing energy prices:

• West Texas Intermediate August contract: $83.88 per barrel, up $1.07, or 1.29%. Year to date, U.S. oil has gained 17%.
• Brent September contract: $87.34 per barrel, up $1.10, or 1.28%. Year to date, the global benchmark is ahead by 13.4%.
• RBOB Gasoline August contract: $2.60 per gallon, up 1.08%. Year to date, gasoline is up 23.7%.
• Natural Gas August contract: $2.41 per thousand cubic feet, down 0.7%. Year to date, gas is down 3.82%.

Gasoline prices are averaging $3.51 per gallon ahead of the Fourth of July, up about 2 cents from last week, according to the motorist association AAA. Some 60 million Americans, a record, are expected to hit the road for the holiday, according to AAA.

Patrick De Haan, head of petroleum analysis at GasBuddy, said prices have been inching up ahead of the holiday as crude has gained $10 in the last couple weeks, though gasoline demand still remains a bit soft.

West Texas Intermediate and Brent hit two-month intraday highs Tuesday on fears that Hurricane Beryl could hit Gulf Coast oil infrastructure. Prices ultimately closed lower, however, as the storm is expected to weaken before potentially hitting south Texas as early as Sunday.

John Evans, analyst at oil broker PVM, said a storm price premium largely eroded given Beryl is expected to weaken into a tropical storm, but the big draw in crude inventories “might just have saved more of a sell off after the hurricane news.”

Helima Croft, global head of commodity strategy at RBC Capital Markets, said the impact of hurricanes on the oil market has become less clear as the U.S. is no longer as dependent on offshore oil production. Refinery shutdowns could be a bearish event by restricting demand.

“We used to think about hurricanes as unquestionably a potential bullish near-term development for oil markets, now the picture is not so clear,” Croft told CNBC’s “Last Call” on Tuesday evening.