Oil edged higher, holding the biggest gain in three months, amid expectations that recovering demand will soon tighten global markets.
West Texas Intermediate futures pushed further above $70 a barrel, and have now recouped much of Monday’s 7.5 per cent collapse. Gasoline use is essentially back to normal in many of the biggest oil-consuming countries, with road traffic data showing a similar trend. The market recovery has spurred China to supply crude from its strategic reserves to local refiners in a bid to cool prices.
Crude slumped on Monday in tandem with broader financial markets on fears that the spread of the coronavirus’ delta variant would inflict a fresh blow on the global economy. The variant has ripped through Asia, prompting a flurry of renewed curbs by governments to check its spread. The price plunge came just after a weekend meeting of OPEC+, at which the 23-nation alliance led by Saudi Arabia and Russia finalized plans to restore halted production.
Since then, the market has been on the mend as traders anticipate that OPEC+’s scheduled output increases aren’t large enough to avert a shortfall in coming months. Sentiment has been boosted as U.S. government data showed oil inventories at the nation’s key storage hub in Cushing, Oklahoma, falling to the lowest since January 2020.
- WTI for September delivery rose 0.9 per cent to $70.96 a barrel on the New York Mercantile Exchange at 10:29 a.m. London time.
- Brent for September settlement also advanced 0.9 per cent to trade at $72.85 a barrel on the ICE Futures Europe exchange.
- Brent’s prompt time spread was 63 cents a barrel in backwardation. While that’s a bullish pattern – with near-dated prices above those further out – it compares with 70 cents a barrel a week ago.
Although there was an unexpected build in overall U.S. crude stockpiles, distillates and gasoline supplies declined, the Energy Information Administration reported on Wednesday. Data from around the world now show gasoline consumption within 4% either side of 2019 levels in the U.S., India, Spain and Portugal, while demand is down six per cent in the U.K.
China’s Strategic Petroleum Reserve supplied about 3 million tons, or 22 million barrels, to processors earlier this month, according to people familiar with the situation. The move was intended to cool prices, the people said. The operation might weaken Chinese demand for imported crude.
© 2021 Bloomberg L.P.