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Crude oil futures higher on expected stock draw, OPEC report

Singapore — Crude oil futures were higher during mid-morning trade in Asia Tuesday as the market anticipated a fall in mid-week US crude inventory data while digesting OPEC's latest report.

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At 10:45 am Singapore time (0245 GMT), ICE October Brent crude futures were up 32 cents/b (0.44%) from Monday's settle at $72.93/b, while the NYMEX September light sweet crude contract was 33 cents/b (0.49%) higher at $67.53/b.

Analysts surveyed Monday by S&P Global Platts were looking for US crude stocks to have fallen 1.7 million barrels in the week ended August 10, with refinery runs remaining high on healthy margins and strong export demand.

This was also in line with the 1.4 million-barrel drop in the previous week ended August 3, which put crude inventories at 407.4 million barrels. Expectations of this week's drop resumes the inventory decline trend that begun in mid-May and was interrupted by a 3.8 million-barrel build in the week ended July 27.

In refined products, analysts polled by Platts were looking for US gasoline inventories to have declined by 1 million barrels the week ending August 10 and distillate inventories to have risen by 250,000 barrels as US economic growth supports higher demand for refined products.

A preliminary report on last week's US inventory levels is due for release by the American Petroleum Institute later Tuesday and more definitive numbers by the US Energy Information Administration on Wednesday.

Despite the positive expectations, activity was muted Tuesday as market focus remained on OPEC's monthly report on oil fundamentals, which forecast global demand for OPEC's crude at 33.40 million b/d for both the third and fourth quarters. That is 1.08 million b/d more than the bloc's July production level, as assessed by the independent secondary sources used by OPEC to track member output.

Saudi Arabia's output fell 200,000 b/d in July to 10.29 million b/d, according to OPEC's monthly report. This shows Saudi Arabia is "not doing what they said," said Tradition Energy analyst Gene McGillian.

June's OPEC meeting ended with a commitment for just under 1 million b/d of increased output, supported by Saudi Arabia and Russia.

The report warned that "if any unexpected supply outages should occur due to natural disasters/technical shortcomings and these coincide with any geopolitical supply disruption, it could bring the market into an imbalanced situation," adding that industry investment had yet to recover to levels seen before the 2014 price crash.

Still, OPEC nudged downward its forecasts of year-on-year oil demand growth for both 2018 and 2019, while raising its projections for non-OPEC supply growth.

World demand is forecast to average 98.83 million b/d in 2018, rising to 100.26 million b/d in 2019, while non-OPEC supply will average 59.62 million b/d in 2018 and 61.75 million b/d in 2019, OPEC said in its report.

"This week, we saw the IEA [International Energy Agency] maintain its projections for global oil demand in 2018, while OPEC made a minor downward revision. That, combined with the OPEC report confirming that the Saudis reined back output in July after opening the spigots in June, appears to have alleviated the downward pressure on crude," said Vandana Hari, founder of Vanda Insights, in a note Tuesday.

"But it could succumb to further bouts of bearishness on account of demand worries," she added.

As of 0245 GMT, the US Dollar Index was down 0.03% at 96.145.

--Avantika Ramesh, avantika.ramesh@spglobal.com

--Edited by Wendy Wells, wendy.wells@spglobal.com