Crude steady as OPEC+, pandemic concerns negate bullish EIA data

0315 GMT: Crude oil futures were steady during mid-morning trade in Asia July 9, as bullishness due to robust US Energy Information Administration data faded quickly amid concerns over a rise in COVID-19 infections and uncertainty over OPEC+ production.

At 11:15 am Singapore time (0315 GMT), the ICE September Brent futures contract was up 5 cents/b (0.07%) from the previous close at $74.17/b, while the NYMEX August light sweet crude contract was up 14 cents/b (0.19%) at $73.08/b.

Data released by the EIA late July 8 showed a headline 6.87 million-barrel draw in US crude inventories in the week ended July 2, leaving inventories more than 7% behind the five-year average and at their lowest since late February 2020. The crude draw was in line with analysts' expectations of a 6.2 million-barrel draw, but was slightly more conservative compared with the American Petroleum Institute's report of a 7.98 million-barrel draw.

However, downstream products data was mixed with the US' gasoline inventories falling 6.08 million barrels during the week ended July 2 to 235.5 million barrels, but distillate inventories rising 1.62 million barrels to 138.69 million barrels.

Total product supplied for gasoline, EIA's proxy for demand, rose more than 9% on the week to 10.04 million b/d in the week ended July 2, reaching an all-time high based on records dating back to 1991.

The surge in the US' implied gasoline demand likely represented stockpiling to meet an anticipated rise in gasoline demand over the long July 4 holiday weekend. Leading up to the holiday last week, road travel was also on the rise, with Apple mobility data showing US driving activity reaching a fresh record, rising 2 percentage points last week to average 164% of the January 2020 baseline.

While the EIA data emphasized strong fundamentals in the US market, it comes against the background of OPEC+ discord that analysts said puts the oil market recovery in jeopardy.

Following the producer group's failure to reach an agreement to increase production quotas from August onward, media reports had emerged signaling that the UAE could raise output outside of the OPEC+ agreement. Analysts said that such a move could prompt other members to follow suit, threating OPEC+ compliance and raising the possibility of more oil hitting the market.

"A lack of unity in OPEC presents a real risk over the medium term," ANZ analysts said in a July 9 note.

Meanwhile, an uptick in COVID-19 infections in countries such as the US and the UK, driven by the spread of the more transmissible Delta variant of the coronavirus, has also alarmed the market. Analysts said that as long as infection numbers remain elevated, border restrictions will also persist, curbing international travel and therefore jet fuel demand.

Analysts, however, were hopeful that the higher vaccination rates will break the link between infection and severe disease, reducing the possibility that further lockdowns will be necessary to curb the spread of the virus.