Oil up 1%, buoyed by US stock drawdown
Gains capped by lingering worries about possible global recession
Crude oil futures rose on Wednesday after industry data showed larger-than-expected drop in US crude inventories, but gains were capped by lingering worries about a possible global recession. Brent crude had gained $0.9, or 1.5%, to $60.93 a barrel by 1110 GMT, after settling 0.5% higher on Tuesday, while US crude was up $0.56, or 1%, at $56.69 a barrel.
US crude oil stocks fell by 3.5 million barrels in the week to August 16, data from industry group the American Petroleum Institute (API) showed on Tuesday. Analysts polled by Reuters had expected a fall of 1.9 million barrels. Crude prices should see support from a bullish API stockpile report that could signal the largest Cushing draw since February 2018, if the EIA validates it, said Edward Moya, senior market analyst at Oanda in New York, referring to the draw on inventories at Cushing, Oklahoma, the delivery point for US crude futures.
Inventory numbers from the government’s Energy Information Administration (EIA) were due at 10:30 a.m. EDT (1430 GMT) and will be more closely watched than usual given the nearing of the end of peak US driving season, analysts said. Tensions in the Middle East remained in the spotlight as US Secretary of State Mike Pompeo said on Tuesday the United States would take every action it can to prevent an Iranian tanker in the Mediterranean from delivering oil to Syria in contravention of US sanctions.
Oil prices were also supported by data showing lower exports in June from Saudi Arabia, the world’s top oil exporter. Saudi Arabia plans to keep its crude exports below 7 million barrels per day (bpd) in August and September despite strong demand from customers to bring the market back to balance, a Saudi oil official told Reuters earlier this month.
But uncertainty over the global economic outlook amid the US-China trade war capped gains in the oil markets. Crude oil remains stuck, with the relief rally in recent days not removing the fear that recession risks could still send the market lower again, said Ole Hansen, Head of Commodity Strategy at Saxo Bank.
Traders are also awaiting this week’s annual US central bank seminar in Jackson Hole, where comments from Federal Reserve chief Jerome Powell will be in focus. Market players continued to fret over recession fears and sluggish oil demand forecasts, said Stephen Brennock of oil broker PVM. A reprieve, however, may be on the cards tomorrow (Thursday) expectations are running high that hints of impending monetary stimulus will be plentiful.