Crude lower amid larger US crude draw; overall outlook positive

Crude oil futures settled lower during mid-morning trade in Asia Sept. 2, as the market was weighed by a larger-than-expected US crude draw against rising OPEC+ output.

At 10:40 am Singapore time (0240 GMT), the ICE November Brent futures contract was down 35 cents/b (0.49%) from the previous close at $71.24/b, while the NYMEX October light sweet crude contract was 43 cents/b (0.63%) lower at $68.16/b.

The OPEC+ alliance in its meeting Sept. 1 agreed to increase crude output by 400,000 b/d scheduled for October, which is also aligned with its current easing policy.

"The alliance rubber stamped a previously announced 400,000 b/d increase at its monthly meeting, with very little resistance from any members. The decision was ultimately backed by a series of data which suggest the market remains tight," said ANZ research in a note Sept. 2.

A note from ING research analysts Sept. 2 also pointed out that while OPEC+ acknowledges that there is still plenty of uncertainty related to COVID-19, they believe that fundamentals will continue to improve.

During their discussion, OPEC+ ministers reviewed an internal forecast that indicated global oil demand would far exceed supply through the rest of the year, by 1 million b/d in September, 1.1 million b/d in October, 800,000 b/d in November and 400,000 b/d in December, S&P Global Platts reported earlier.

The group is next set to meet on Oct. 4.

Meanwhile, data from the Energy Information Administration showed US crude inventories fell by 7.2 million barrels to 425.4 million barrels for the week ending Aug. 27, bringing inventory levels to roughly 6% below the five-year seasonal average.

Over the same period, gasoline stocks also rose by 1.3 million barrels to about 2% below the five-year seasonal average, while distillate stocks fell by 1.7 million barrels to about 9% below the five-year seasonal average.

Data released from the American Petroleum Institute showed a draw of 4.05 million barrels in US crude inventories for the week ending Aug. 27, far greater than the 1.62-million-barrel dip indicated in the previous week. The API report also showed gasoline inventories growing by 2.71 million barrels for the week ending Aug. 27, while distillate stocks dropped by 1.96 million barrels over the same period.

Elsewhere, the offshore Gulf of Mexico oil and gas producers, and onshore Louisiana refiners are slowly returning to operations following the passing of Hurricane Ida.

However, continued widespread power outages and damages to onshore facilities have been slowing the return process.

As of Sept. 1, 1.455 million b/d of oil production remained shut, roughly 80% of total Gulf of Mexico output, according to the US Bureau of Safety and Environmental Enforcement.

"This appears to confirm the view that we should see crude oil production make a quicker return than refinery operations, which should be supportive for refined product cracks," said ING research analysts.