Oil advances as U.S. surplus near 3-year low takes center stage
Pubdate：2018-07-25 09:21
Source：JESSICA SUMMERS
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NEW YORK (Bloomberg) -- Crude rose on expectations that U.S. oil inventories already close to a 3-year low continue to shrink.
Futures rose as much as 1.5% in New York on Tuesday. A U.S. government report is forecast to show a 3.1 MMbbl decline in commercial stockpiles when it’s released on Wednesday, according to a Bloomberg survey.
“What we’ve been seeing in the crude stock numbers is increased volatility,” said Bill O’Grady, chief market strategist at Confluence Investment Management LLC in St. Louis. “The reality is this is high gasoline demand season. They’re going to keep refineries operating pretty strongly until after Labor Day.”
The U.S. oil benchmark has declined about 7% this month amid escalating trade tensions between the U.S. and China that threatens global energy demand. While prices gained briefly on Monday amid a war of words between the U.S. and Iran over oil exports, pledges from Saudi Arabia and other producers to boost production have investors worried about a surfeit.
“The market seems to be obsessed with the idea that there’s oversupply, for whatever reason, and so financial investors have rushed to the exits,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.
West Texas Intermediate crude for September delivery climbed $0.95 to $68.84/bbl at on the New York Mercantile Exchange. Total volume traded was about 27% below the 100-day average.
Brent for September settlement added $0.31 to $73.37 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $5.06 premium to WTI.
Brent contracts are signaling a short-term surplus. The September contract was trading at a $0.39 discount to October -- a condition known as contango -- as higher Libyan production allayed supply concerns after a labor dispute at North Sea platforms operated by Total.
“The basic backdrop is bullish,” Jeff Currie, head of commodities research at Goldman Sachs Group Inc., said in a Bloomberg television interview. Still, “the market’s rotating back and forth, between being slightly balanced, slightly in a surplus, slightly in a deficit.”
In the U.S., inventories at the storage hub at Cushing, Oklahoma, declined by an estimated 900,000 bbl last week, according to a Bloomberg forecast.
The industry-funded American Petroleum Institute will release its weekly tally of inventories later on Tuesday.
Oil market News
Gasoline futures rose 1.4% to $2.121/gallon. China unveiled a package of policies to boost domestic demand as trade tensions threaten to worsen the nation’s economic slowdown. There is “ real risk” oil will reach $100/bbl, Mizuho Securities USA analysts including Paul Sankey wrote in a note.
