Oil Steadies After Epic Loss; Focus on U.S. Stockpiles

© Reuters.

By Barani Krishnan

AiVIF.com - Oil prices rose about 1% on Tuesday as bulls tried to find their footing after the epic losses of the previous session. The focus returned to the release of weekly inventory by both industry and government.

New York-traded West Texas Intermediate crude, the benchmark for U.S. oil, settled up 85 cents, or 1.3%, at $67.20 per barrel for the new most-actively traded month of September. 

August WTI, which had been the market’s gauge until Monday, lost $5.39 or 7.5% in the previous session for the largest one-day decline since April 2020. August WTI expired as a contract on Tuesday after settling up $1, or 1.5%, at $67.42.

London-traded Brent, the global benchmark for oil, settled at $69.35 for its most-active September contract. On Monday, that contact lost $4.97 or 6.8%.

Oil prices closed up ahead of stockpiles data on U.S. crude, gasoline and diesel due from industry body American Petrleum Institute  and the government's Energy Information Administration.

API will issue at 4:30 PM ET (20:30 GMT) its snapshot on inventories for the week ended July 16.

API’s figures serve as a precursor to the official weekly inventory data due on Wednesday from the EIA.

According to a consensus of analysts tracked by AiVIF.com, U.S. crude crude stockpiles likely fell by 4.47 million barrels last week, versus the previous week’s drop of 7.90 million.

Gasoline inventories are expected to have fallen by 1.04 million barrels to negate an exact build of the same volume from the prior week, consensus shows.

And stockpiles of distillates, made up of diesel and heating oil, likely grew by 557,000 barrels last week after expanding by 3.66 million the week before.  

Monday’s sell-off in oil came after an output hike from August onward announced by oil producing alliance OPEC+ coincided with a resurgence of Covid cases from the Delta variant that stirred worries about global growth. The dump in oil was exacerbated by a plunge in global stocks and other risk assets, including cryptocurrencies.

Tuesday’s market performance suggested that some of the worries over growth had abated, and that OPEC+ might not be in such a tenuous position to manage additional supplies in a fairly well-balanced market, said analysts.

“A move below here may signal some near term downside momentum but I expect it would be quite limited given the longer term outlook for many countries and how the exit strategy is being managed by OPEC+,” said Craig  Erlam, who oversees research for Europe and EMEA at broker New York-based broker OANDA.