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Oil settles higher on hopeful demand outlook as US oil stocks sink

by Jessica Weisman-Pitts
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By Georgina McCartney

HOUSTON (Reuters) -Oil prices settled higher on Wednesday after a jump in U.S. refining activity last week drove a larger-than-expected decline in gasoline and crude inventories, but gains were capped due to minimal supply disruptions from Hurricane Beryl.

Brent futures settled up 42 cents, or 0.5% at $85.08 a barrel. U.S. West Texas Intermediate (WTI) crude settled up 69 cents, or 0.85%, at $82.10 a barrel.

WTI rose by as much as $1 during the session, after the U.S. Energy Information Administration reported that U.S. crude inventories fell by 3.4 million barrels to 445.1 million barrels in the week ended July 5, far exceeding analysts’ expectations in a Reuters poll for a 1.3 million-barrel draw.

Gasoline stocks fell by 2 million barrels to 229.7 million barrels, much bigger than the 600,000-barrel draw analysts expected during U.S. Fourth of July holiday week.

“More than anything the EIA data seems to be the driving force right now for higher prices,” said Phil Flynn, analyst at Price Futures Group.

Both crude futures contracts had ended the previous three sessions lower on signs that the Texas energy industry came off relatively unscathed from Hurricane Beryl.

Oil and gas companies restarted some operations on Tuesday. On Wednesday morning, the Port of Houston said it had returned to normal start times for operations at its eight public terminals.

Refineries and offshore production facilities saw limited storm damage and have largely returned to normal operations, easing concerns of a supply disruption.

Federal Reserve Chair Jerome Powell said he was not yet ready to declare inflation beaten, but felt the U.S. remained on a path to stable prices and continued low unemployment.

Investors are betting on interest rate cuts for September, which could boost economic growth and oil demand.

Geopolitical risk did little to move prices, analysts said, with investors somewhat fatigued over discussions about a ceasefire in Gaza and the war in Ukraine, said Tim Snyder, economist at Matador Economics.

“We see news stories out there that are having little impact on the market, which means the market is discounting those,” he added.

In the Middle East, Hezbollah chief Sayyed Hassan Nasrallah said that if Hamas reached a Gaza ceasefire deal with Israel, Hezbollah would stop its operations with no need for separate talks. The group began firing at Israeli targets on the border in support of Palestinians after its ally Hamas launched the Oct. 7 attack on Israel that precipitated the war in Gaza.

(Reporting by Georgina McCartney in Houston, Ahmad Ghaddar and Robert Harvey in London, additional reporting by Emily Chow and Trixie Yap in Singapore; Editing by Christina Fincher, David Gregorio and Mark Potter)