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Crude mixed after overnight rally; US stock draw aids sentiment

Crude oil futures were mixed during mid-morning trade in Asia Oct. 21, following a rally overnight, but sentiment remained firm after an unexpected US inventory draw raised hopes of demand recovery.

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At 10:39 am Singapore time (0239 GMT), the ICE December Brent futures contract was down 6 cents/b (0.07%) from the previous close at $84.49/b, while the NYMEX November light sweet crude contract rose 13 cents/b (0.16%) at $83.55/b.

"Crude prices rallied after US stockpiles unexpectedly declined and as gasoline demand strengthened despite the high prices at the pump," said OANDA's Senior Market Strategist Edward Moya, adding that the oil market deficit is not going away anytime soon as gasoline and distillate demand remains healthy, while jet fuel demand should pick up next month as international roars back.

Total commercial crude stocks fell 430,000 barrels in the week ended Oct. 15 to 426.54 million barrels, US Energy Information Administration data showed Oct. 20, putting them around 6% behind the five-year average for this time of the year. Total motor gasoline inventories decreased by 5.4 million barrels on the week, while distillate fuel inventories decreased by 3.9 million barrels on the week.

The bulk of the crude draw was realized at the NYMEX delivery point of Cushing, Oklahoma, where stocks dropped 2.32 million barrels to 31.23 million barrels. The draw was the largest one-week inventory slide at Cushing since February, leaving inventories nearly 40% behind the five-year average and at the lowest since October 2019.

Sharing similar sentiment, ANZ research analysts pointed out in an Oct. 21 note that demand for gasoline was also strong, with a 5.37 million barrel withdrawal pushing inventories to their lowest level since November 2019.

As the oil prices stay firm, some analysts expect increased pressure on the OPEC+ to pump up production.

"Continued strength in oil prices means that pressure on OPEC+ to pump more will only grow. Already there are calls from the US, India and Japan for the group to increase output more aggressively," ING research analysts said in a note Oct. 21.

"However, OPEC+ is reluctant to do so, which suggests that oil prices will remain well supported for the remainder of this year," the note read.