Oil Up; Weak U.S. Draws, White House Pressure on OPEC Limit Gains

© Reuters.

By Barani Krishnan

AiVIF.com - Oil prices rose on Wednesday, helping market longs extend their recovery from a dismal week. But gains were limited somewhat by disappointing drawdowns in U.S. stockpiles.

The market was also under pressure briefly after a White House official pushed the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, to boost production faster than the current pace of 400,000 barrels per month planned by the 23-nation group.

“At a critical moment in the global recovery, this is simply not enough,” Jake Sullivan, national security adviser to President Joe Biden, said in a statement, referring to the OPEC+ production, which he said would not even “fully offset previous production cuts” made by the group since May 2020.

Analysts, however, said they weren’t sure how much success the White House would have in pressuring OPEC+, especially with crude prices having declined about 10% or more from this year’s highs amid waning summer demand for oil and a renewed spike in Covid cases.

“The belief that higher prices are harming the recovery and the current pace isn't sufficient is behind the push,” Craig Erlam, analyst at OANDA, said, referring to the call by Sullivan.

Erlam noted that OPEC+ was no stranger to the White House trying to interfere in its decision making process, with former president Donald Trump being a constant critic of the group during his term.

“It's clear that pressure is going to ramp up. How that will go down in the group is another thing,” Erlam said. “Some will be more than happy to increase production faster while others may be more reluctant after a prolonged period of very low prices.”

New York-traded U.S. West Texas Intermediate crude, the benchmark for U.S. oil, was up $1.02, or 1.5%, to $69.31 per barrel by 1:30 PM ET (17:30 GMT). WTI lost 7.7% last week, its sharpest weekly loss since October 2020.

London-traded Brent, the global benchmark for oil, rose by 82 cents, or 1.2%, to $71.45. Brent lost 7.4% last week.

Weekly consumption in U.S. crude oil and gasoline was less than expected during the week ended July 6, data from the Energy Information Administration showed, as demand slid in the twilight stretch of summer and amid a renewed spike in coronavirus infections.

U.S. crude inventories fell by 448,000 barrels in the week to August 6, the EIA said in its Weekly Petroleum Status Report. Analysts tracked by AiVIF.com had expected a drawdown of 750,000 barrels instead.

The EIA reported a smaller-than-expected crude draw as U.S. imports declined by 36,000 barrels per day from the previous week. But exports of U.S crude spiked by almost 760,000 bpd to 2.66 million. That suggested

Production of U.S. crude, on the other hand, rose by 100,000 bpd to 11.3 million.

Gasoline stockpiles also fell less than expected, sliding by 1.4 million barrels against a forecast 2 million, the EIA data showed.

Distillates, which include diesel and heating oil, had the best numbers of the lot, drawing down by almost 1.8 million versus an expected 500,000 barrels.