Oil Edges up Before US Inventory Data, OPEC Meet

© Reuters.

By Barani Krishnan

AiVIF.com - Crude prices settled a touch higher on Tuesday on expectations of another outsize U.S. inventory draw for last week, even as market participants remained jittery about forthcoming output hikes for August that producer group OPEC+ was likely to announce.

New York-traded West Texas Intermediate crude, the benchmark for U.S. oil, settled up 7 cents, or 0.1%, at $72.98. In the previous session, WTI fell 1.5% for its lowest settlement since June 22.

London-traded Brent, the global benchmark for oil, finished the session up 14 cents, or 0.2.%, at $74.28. Brent lost 1.6% on Monday, also finishing at its lowest in about a week.

The correction in the latest session came amid reports that OPEC+ at its meeting this Thursday could increase oil production between 500,000 and 1 million barrels per day starting in August.

The 23-nation OPEC+ — comprising the 13-member Saudi-led Organization of the Petroleum Exporting Countries and its 10 Russian-steered allies — is meeting after months of sustained crude price hikes that some analysts fear might begin impacting demand. Some OPEC+ members led by Russia also want a substantial production hike to maximize revenue from current prices.

Much will, however, depend on whether Saudi oil minister Abdulaziz bin Salman will allow an output hike large enough to cool the market.

OPEC Secretary-General Mohammed Barkindo said on Tuesday that oil consumption in the second half of 2021 was expected to be 5 million barrels per day higher than in the first.

He said oil inventories in developed countries in the OECD, or Organization of the Economic Cooperation Development, were below the 2015-19 average now.

Even so, he urged caution against a sharp production hike by OPEC+, which is still holding about 5.8 million barrels daily from the market under production cuts that began in April 2020 at the height of the demand-destroying Covid pandemic. OPEC+ cuts have helped crude prices treble from mid-$20 levels a year 15 months ago.

“Significant uncertainty in the oil market necessitates caution,” Barkindo said on Tuesday, citing risks especially from the Delta variant of the Covid-19 that has led to new outbreaks in Asia and Europe.

Oil prices also steadied ahead of weekly inventory data due from the American Petroleum Institute, or API, on Tuesday and the U.S. Energy Information Administration, or EIA, on Wednesday.

The API report is scheduled for release at 4:30 PM ET (20:30 GMT) and will serve as a precursor to what the EIA will report as weekly balances of crude, gasoline and distillates.

According to a consensus of analysts tracked by AiVIF.com, U.S. crude crude stockpiles likely fell by 4.7 million barrels for the week ended June 25, adding to the drop of 7.6 million in the previous week to June 18.  

Gasoline inventories likely fell by 886,000 barrels versus the slide of 2.93 million in the prior week, consensus shows.

And stockpiles of distillates, made up of diesel and heating oil, likely built by 486,000 barrels after a previous rise of 1.75 million.