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Oil edges higher on drop in US stockpiles, Opec+ compliance
OIL edged higher after a report pointed to a drop in US crude stockpiles and on signs that additional supply from Opec+ next month won't be as much as previously anticipated.
Futures in New York traded near US$40.50 a barrel after closing up 0.5 per cent on Tuesday. The American Petroleum Institute reported that US inventories fell by 8.32 million barrels last week, according to people familiar with the data. That would be the largest drawdown since December if confirmed by official figures due Wednesday, suggesting a supply glut is easing.
Opec+ is seeking compensatory production cuts in August and September from members that have missed targets in previous months, according to delegates. The proposal, which may temper the impact of the planned supply resumption, will be discussed on Wednesday by the group's ministerial monitoring committee.
Crude has traded in a tight range of around US$40 a barrel this month as less supply and recovering demand is balanced by nervousness over a pandemic that's still not under control in many parts of the world.
A deterioration in relations between Washington and Beijing is also clouding the global economic outlook, with the US announcing an end to Hong Kong's special status on Tuesday.
The tapering of the Opec+ supply cuts is already priced-in, so isn't likely to move the market much, said Howie Lee, an economist at Oversea-Chinese Banking Corp Oil will probably remain around current levels for a while, but there's a downside risk if the virus situation gets worse, he said.
West Texas Intermediate for August delivery rose 0.5 per cent to US$40.47 a barrel on the New York Mercantile Exchange as at 7:26 am in London. The contract finished at US$40.90 on July 8, the highest close since March 6.
Brent for September settlement climbed 0.5 per cent to US$43.10 after advancing 0.4 per cent on Tuesday. BLOOMBERG