Crude oil rises as U.S. inventories fell for third straight week (NYSEARCA:USO)

Crude oil futures climbed Wednesday, snapping a three-session losing streak, after the U.S. reported a much larger than expected drawdown in crude stocks for last week in a third consecutive decrease.

The 4.9M-barrel draw in crude inventories was accompanied by builds in gasoline and diesel stocks, as refineries continue to run at high levels despite a drop in Gulf coast capacity use where Hurricane Beryl landed early last week.

Gasoline demand fell to 8.8M bbl/day following the July 4 holiday week, down from 9.4M bbl/day in each of the previous two weeks.

The post-holiday week likely saw “reductions in overall travel demands, which supported the distillate and gasoline increases as inflows remained healthy,” Tradition Energy director of market research Gary Cunningham told MarketWatch.

Meanwhile, shares of energy companies (NYSEARCA:XLE) rose as traders rotated back into sectors that have been laggards in recent months.

“Energy has now reversed some of the June weakness vs. oil, but a softening outlook for inflation and crude balances has resulted in limited new investor interest,” Morgan Stanley analysts said.

Front-month Nymex crude (CL1:COM) for August delivery finished +2.6% to $82.85/bbl, its largest one-day percentage gain since June 10, and front-month September Brent (CO1:COM) settled +1.6% to $85.08/bbl.

U.S. natural gas (NG1:COM) suffered another session of heavy settling, with the front-month August contract closing -7% to $2.035/MMBtu, its lowest settlement value since May 2.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)

Bearish factors including less heat in near-term weather forecasts, sluggish liquefied natural gas exports and abundant production continue to weigh on the natural gas market, with the combination leading to “a stall in the contraction of the storage surplus that had been a major source of support across the May-early June period,” Ritterbusch analysts said, according to Dow Jones.

“Although net speculative short positioning is already in bullish territory, there appears to be additional room for more spec selling,” Ritterbusch wrote.