Brent, WTI Jump as US Inventories Decline

By Adedapo Adesanya

The two main crude oil grades closed higher on Wednesday, supported by large declines in US crude and fuel stocks, but concerns over weak global demand remained in the shadows.

Brent crude futures appreciated by 70 cents or 0.9 per cent to $81.71 a barrel and the US West Texas Intermediate (WTI) crude rose by 63 cents or 0.8 per cent to $77.59 per barrel.

Prices ticked higher after the US Energy Information Administration (EIA) reported an inventory decline of 3.7 million barrels for the week to July 19 versus the inventory draw of 4.9 million barrels of the previous week.

The American Petroleum Institute (API), meanwhile, on Tuesday estimated another inventory draw in crude oil for the week to July 19, at 3.9 million barrels.

In fuels, the EIA reported more draws as gasoline (petrol) stocks shed 5.6 million barrels in the week to July 19, with production averaging 10.2 million barrels daily.

However, the market remained concerned about worldwide summer demand. U.S. oil refiners are anticipated to post considerably lower second-quarter profitability than a year ago after a slow summer driving season hurt refining margins, according to industry experts.

Meanwhile, growing oil supply risks from Canadian wildfires continued and threatened a large amount of supply, which offered support as producers curtailed production.

However, the market remained concerned about worldwide summer demand as oil refiners in the US anticipate posting considerably lower second-quarter profitability than a year ago after a slow summer driving season hurt refining margins.

Prices are also being pressured by ceasefire negotiations between Israel and Hamas, as well as ongoing concerns that China’s economic downturn, the world’s largest crude importer, may reduce global oil consumption.

Market analysts noted that lukewarm Chinese oil demand is a bearish factor but added that there could be some improvement in the current third quarter.

Crude oil supplies to India, the world’s third-largest oil importer and user, fell in June to their lowest level since February.

Russia’s energy ministry pledged to stick to the crude-output quota set by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) in July after its June production exceeded limits.

OPEC+ will hold an online joint ministerial monitoring committee meeting (JMMC) next Thursday (August 1) to review the market but there are indications that the panel is unlikely to recommend changing the group’s output policy.