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Crude oil futures rise on US stocks data as market awaits OPEC+ meet

  • Author
  • Rohan Gupta
  • Editor
  • Wendy Wells
  • Commodity
  • Oil

0235 GMT: Crude oil futures ticked higher in mid-morning trade in Asia June 23 after the American Petroleum Institute reported a large draw in US crude inventories as the market awaited the July 1 OPEC+ meeting.

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At 10:35 am Singapore time (0235 GMT), the ICE August Brent futures contract was up 38 cents/b (0.51%) from the previous settle at $75.19/b, while the NYMEX August light sweet crude contract was 29 cents/b (0.4%) higher at $73.14/b.

The uptick in prices comes after the API late June 22 reported a 7.2 million-barrel draw in US crude inventories in the week ended June 18. Downstream product inventories in contrast continued to trend higher, with the API reporting a 959,000-barrel rise in US gasoline inventories in the week, and a 992,000-barrel rise in distillate inventories.

However these builds did not dampen sentiment in the market as they were largely attributed to rising refinery utilization in the US, which analysts surveyed by S&P Global Platts expected to have increased 0.5 percentage points to 93.1% of total capacity in the week ended June 18.

In Asia, there was some consternation in the market after the Wall Street Journal reported June 22 that China intends to keep border restrictions in place for at least another year due to the emergence of new coronavirus variants and a schedule of sensitive events such as a once-in-a-decade power transition within the ruling Communist Party and the Winter Olympics next February.

"The global reopening of the economy is key for the crude demand outlook, so China's plan to keep the pandemic border restrictions for another year also was a drag on sentiment," OANDA senior market analyst Edward Moya said in a June 23 note.

Nevertheless, analysts said that the market remained buoyed by rising mobility rates globally, and especially in the western hemisphere and China, where vaccination rates are rising rapidly.

Parts of India have also rolled back their lockdown measures, while the Japanese government has announced its intension to slowly ease the coronavirus state of emergency in Tokyo and several other prefectures in time for next month's opening ceremony of the Tokyo Olympics, local media reported.

The gradual easing of lockdown restrictions globally portends well for downstream products demand, which will also shore up the crude complex.

Amid this rosy demand outlook for crude, the OPEC+ group is considering raising output further in August, according to media reports citing unnamed OPEC+ sources.

The producer group is currently holding crude production at 6.2 million b/d below October 2018 levels to balance demand and supply during the pandemic, and intends to taper this output cut to 5.76 million b/d in July.

The OPEC+ coalition meets right after an OPEC meeting on July 1, where the market expects the coalition to decide on production quotas for August and possibly beyond.

"Oversupply fears are not back just yet, but the harsh reality that oil-producing countries will be eager to secure market share should put a damper on $100 oil price bets," Moya said.