By Teddy Nwanunobi
For a second on Friday, oil prices rose, as data showed a draw in U.S. inventories, but were headed for a weekly loss amid uncertainty about global supplies fueled by an Organisation of the Petroleum Exporting Countries and allies including Russia (OPEC+) impasse.
Brent crude oil futures were up 27 cents, or 0.4 per cent, at $74.39 a barrel by 0644 GMT. U.S.
West Texas Intermediate futures were up 39 cents, or 0.5 per cent, at $73.33 a barrel.
Prices on both sides of the Atlantic were on track for a weekly loss of more than 2 per cent, dragged by the collapse of output talks between the OPEC+.
“The drop in stockpiles reinforced views that demand was picking up as the U.S. driving season had begun. Since there’s no major lift in the U.S. shale output, some investors are bullish, despite the OPEC+ spat,” the General Manager of Research at Nissan Securities, Hiroyuki Kikukawa, said.
U.S. crude and gasoline stocks fell and gasoline demand reached its highest since 2019, the U.S. Energy Information Administration said on Thursday, signaling increasing strength in the economy.
Crude inventories fell by 6.9 million barrels in the week to July 2 to 445.5 million barrels, the lowest since February 2020, and more than the expected 4 million-barrel drop estimated in a Reuters’ poll.
Gasoline stocks fell by 6.1 million barrels, exceeding expectations for a 2.2 million-barrel drop.
Even with oil prices rising toward $75 a barrel, U.S. shale firms are keeping their pledges to keep production flat, a departure from previous boom cycles.
U.S. production peaked near 13 million barrels per day (mbpd) in late 2019, and then fell amid COVID-19.
Output rebounded to about 11 million bpd in mid-2020, but has stagnated since.
However, gains in oil prices were capped by worries that members of the OPEC+ group could be tempted to abandon output limits that they have followed during the pandemic due to the breakdown in discussions between major oil producers Saudi Arabia and the United Arab Emirates.
The two Gulf OPEC allies are at odds over a proposed deal that would have brought more oil to the market.
Russia was trying to mediate to help strike a deal to raise output, OPEC+ sources said on Wednesday.
The United States had high level conversations with officials in Saudi Arabia and the UAE, the White House said on Tuesday.
The global spread of the Delta coronavirus variant and worries it could stall a worldwide economic recovery also weighed on oil prices.
“A draw in the U.S. crude inventories was a positive factor, but it could be a temporary phenomena given a resurgence in the COVID-19 pandemic in the U.S. and elsewhere,” the Chief Analyst at Sunward Trading, Chiyoki Chen, said.
Fresh COVID-19 lockdowns could slow a recovery in air travel and demand for jet fuels, he added.
In Japan, the Olympics will take place without spectators in host city Tokyo, as a resurgent COVID-19 forced the government to declare a state of emergency in the capital that will run throughout the Games.
COVID-19 cases in the United States are rising, almost entirely among people who have not been vaccinated.
WTI crude futures rose on Thursday as the US reported a seventh straight weekly decline in domestic crude inventories.
August Nymex light sweet crude futures increased by 74¢/bl, to settle at $72.94/bl.
September Ice Brent rose by 69¢/bl to settle at $74.12/bl, while the WTI spread narrowed to $1.90/bl.
Argus-assessed August WTI Houston was heard at a 30¢/bl premium to the US light sweet benchmark at Cushing, Oklahoma, near the time of Nymex settlement, down from yesterday’s 43¢/bl premium.
US crude inventories fell by 6.9mn bl to 445.5mn bl last week, according to the Energy Information Administration, marking the seventh straight week of large withdrawals.
The agency also reported that estimated US gasoline demand reached historic highs as some region’s cash prices surged to the highest in seven years.
WTI and Brent crude prices fell sharply earlier this week as the future of the OPEC+ alliance remains in limbo, following the 11th-hour cancellation of a planned ministerial meeting on July 5.
OPEC member the UAE is holding out on agreeing to proposals put forward by Russia and Saudi Arabia for crude production increases.
On the demand side, more countries in Asia-Pacific have re-imposed restrictions amid resurgence in coronavirus cases. Japan will re-impose a state of emergency in Tokyo next week which will probably last until August 22.
This will keep Tokyo under emergency measures throughout the Olympic Games scheduled from July 23 to August 8.