Crude rangebound after rising overnight on lower US supplies

Singapore — 0254 GMT: Crude oil futures were rangebound in midmorning trade in Asia July 2 after rising overnight on a draw down of US commercial crude inventories, even as a resurgence of COVID-19 cases weighed on market sentiment.

At 10:54 am Singapore time (0254 GMT), ICE September Brent crude futures were unchanged from the July 1 settle at $42.03/b, while the NYMEX August light sweet crude contract was down 2 cents/b (0.05%) at $39.80/b.

US commercial crude stocks decreased as refinery demand continued to recover and imports declined, the US Energy Information Administration data showed July 1.

Commercial crude inventories fell 7.19 million barrels at 533.53 million barrels in the week ended June 26, EIA said, leaving stockpiles around 15% above the five-year average for this time of the year.

The data released was slightly lower but in line with the weekly inventory data from the American Petroleum Institute, released June 30, which estimated a significant draw in crude oil inventories at 8.16 million barrels for the week ended June 26.

"Crude oil prices held early gains as inventories in the US fell more than expected. EIA data showed stockpiles in the US were down 7.2mbbl last week, the biggest retreat since December. At Cushing, WTI's main storage/pricing hub, stockpiles were down for the eighth consecutive week," ANZ analysts said in a note July 2.

However, the continued rapid spread of COVID-19 cases in states such as Arizona, and in the three most US populous states of California, Texas and Florida, continued to keep oil prices in check. Newly reported coronavirus infections in the US topped 50,000 on July 1 for the first time, largely led by states that were early to reopen their economies, according to media reports.

Driving activity in Texas has been trending lower since mid-June while in California, Texas and Florida, driving activity appears to be leveling off after steadily recovering from spring lows, Apple mobility data showed.

US gasoline inventories rose 1.2 million barrels at 256.52 million barrels in the week ended June 26, as demand eased by 50,000 b/d at 8.56 million b/d.

"Counter-seasonal builds in Gasoline inventories as stockpiles unexpectedly rose are not precisely a bullish delight as the EIA data showed that gasoline imports hit the highest level since last August and peaked the most on a seasonal basis in nine years. And suggesting all eyes will be trained on consumer deportment changes over the July 4th weekend, especially as they pertain to holiday weekend driving propensity," said Stephen Innes, chief global markets analyst at AxiCorp, in a note July 2.

On the supply front, OPEC+ continues to ensure strict compliance to agreed production cuts across its member countries. In June, OPEC+ delivered 6.52 million b/d of the pledged reduction in production volume, equal to 107% compliance, and in contrast to a much lower figure of 77% in May, according to a Reuters survey.