Crude oil futures rangebound amid US inventory drawdown, global growth concerns

Singapore — 0305 GMT: Crude oil futures were steady to higher in mid-morning trade in Asia July 29 after an unexpected draw in US crude stocks provided some support to the global crude complex amid an uncertain demand outlook.

At 11:05 am Singapore time (0305 GMT), ICE Brent September crude futures were up 11 cents/b (0.25%) from the July 28 settle at $43.33/b, while the NYMEX September light sweet crude contract was 1 cent/b (0.02%) higher at $41.05/b.

"Broadly, we have been seeing crude oil prices paring gains from Tuesday with continued growth concerns capping further upsides at current levels," IG market strategist Pan Jingyi said July 29. "The surprise draw in crude oil inventories according to the API report had played a part in supporting prices overnight, though WTI can be seen staying relatively more cautious with a buildup in official EIA crude inventory expected on Wednesday," she added.

The American Petroleum Institute overnight reported a 6.83 million-barrels draw in crude oil inventories for the week ending July 24, against market expectations of a 450, 000-barrel rise, according to analyst reports. More definitive US stocks data is due for release by the Energy Information Administration later on July 29.

"The enormity of the inventory draw should be sufficient to hold the bears [at] bay [and] temporarily alleviate some concerns about ongoing demand distress," AxiCorp chief global markets analyst Stephen Innes said in a note July 29.

However, a resurgence in coronavirus infections in the Asia-Pacific, protracted US fiscal stimulus negotiations and an increase in supply from OPEC+ from August were weighing heavily on market sentiment, keeping crude prices rangebound, market sources said.

China reported 101 new coronavirus cases July 28 and Vietnam 30, while Tokyo, Hong Kong and Melbourne have reported jumps in infections rates in recent days, underlining the difficulty of containing the virus as restrictions ease in places that had earlier curbed infection rates, and indicating that demand was likely to remain subdued amid the uncertainty.

In the US, negotiations over a proposed trillion-dollar fiscal stimulus package that would provide a one-off $1,200 payment while cutting weekly federal unemployment benefits from $600 to $200 are continuing; analysts said the protracted stimulus negotiations and $400 reduction would weigh on consumer spending and market sentiment.

Global crude output is also set to increase next month as OPEC+ sticks with its schedule of tapering coordinated production cuts from 9.7 million b/d to 7.7 million b/d from August 1.