OIL FUTURES: Crude falls as US products inventory rise, OPEC+ deal more likely

Crude oil prices retreated July 15 amid anticipation that OPEC+ members Saudi Arabia and the UAE may have reached a production agreement, and EIA data reporting a rise in US gasoline and distillate stocks.

At 1045 GMT, September ICE Brent futures were down 98 cents/b to $73.80/b, while August NYMEX WTI futures were $1.13/b lower at $71.70/b.

US Energy Information Administration, or EIA, data released July 14 showed US gasoline stocks rose 1 million barrels to 236.5 million barrels while US distillate stocks rose 3.7 million barrels to 142.3 million barrels in the week to July 9.

The inventory builds were a surprise as analysts had expected a drawdown in stocks, and were in part driven by a drop in implied gasoline demand to 9.3 million b/d in the week to July 9, from 10 million b/d a week ago.

Anticipation of a compromise deal between OPEC+ members Saudi Arabia and the UAE also pressured crude oil prices.

"According to the agreement compromise, the level upon which the UAE's production cuts is based would be a good 500,000 barrels per day higher. In return, the UAE has apparently agreed to extend the production cuts agreement until the end of 2022," said Carsten Fritsch, analyst at Commerzbank.

While the likelihood of a deal has increased, it has not been agreed yet and any such deal would have to be signed off by the whole OPEC+ group.

"There is still no agreement between the two countries, and it is a power play now. There's no saying when a deal could be reached but news that there is some resolution in sight has led the market to expect an output increase in the near term," Sukrit Vijayakar, director of Trifecta Consultants, told S&P Global Platts July 15.

Crude prices may remain under pressure if US gasoline demand remains subdued, particularly during the US holiday season over summer, when demand is typically higher. Concerns over rising coronavirus cases in Europe and Asia may add further pressure to oil and products markets.