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Crude oil prices edged higher amid a fourth consecutive drop in the US inventories

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Crude oil prices rose on Wednesday amid the latest data for the fourth consecutive drop in US stockpiles, which is reducing concerns about oversupply against the tensions on the trading front.

The futures on US crude oil WTI rose by 1.45% to 58.67 USD per barrel, while the Brent variety edged higher by 0.98% to 64.79 USD per barrel.

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The crude oil is supported this year mainly by the OPEC+ quota deal, which was recently extended with another 9 months.

According to the American Petroleum Institute, crude oil stocks fell by 8.1 million barrels to 461.4 million barrels in the week ending July 5. For comparison, analysts’ expectations were for a decline of 3.1 million barrels. Official data from the Energy Information Administration is expected later today.

The crude oil prices have been put under pressure because of concerns over global economic growth amid a continuing US-China trade war.

“The global economic growth remains under pressure, which is clear from the latest research in the manufacturing sector, and this will affect the demand for raw materials such as oil”, says the NAB analysis.

Moreover, the forecasts are that crude oil production in the US will grow to a record of 12.36 million barrels per day this year compared with 10.96 million barrels per day produced in 2018. This will keep the prices under pressure and will overshadow the efforts of OPEC and its allies to stabilize the raw material prices.

US oil inventories

The American Petroleum Institute (API) reported a decrease of 8.129 million barrels in the US crude oil inventories for the week ending July 5. The API also reportedly showed a stockpile decline of 257,000 barrels for gasoline.

Distillate inventories grew by 3.690 million barrels for the week, while inventories at Cushing fell by 754,000 barrels.

In the previous week ending June 28, API reported a decrease of 5 million barrels of crude oil inventories, while the US Energy Information Administration (EIA) reported a decline of 1.1 million barrels for the same period.

The EIA data are expected to show crude inventories down by 2.1 million barrels last week, while the fall in gasoline stocks will be 400,000 barrels for gasoline and the distillate supplies will rise by 1.5 million barrels.

Chinese oil demand

China presented oil import data for April, with the figures expected to continue its uptrend, covering nearly two-thirds of the global demand for this resource in 2019.

However, the estimates of current oil consumption in China show that the trade war with the United States has had a negative impact on the industry of the largest Asian economy.

The signals show a slowdown in Chinese economic growth, while the build-up of oil inventories, which reached the highest levels this year, may slow later in 2019 if oil prices rise to a level that Beijing considers too high to add more stocks at the current pace.

China reached a new monthly record of 10.64 million barrels per day on crude oil imports in April this year, with refiners focusing on stockpiling an Iranian product before the US abolished the grace period for major buyers. China’s oil imports then dropped in May, as Chinese refineries drastically reduced Iran’s oil imports after the US sanctions came into full force. At the same time, some of these refineries ceased activity due to annual plan checks.

Crude oil imports in China in the first half of the year jumped by 8.8% YoY or 800,000 barrels per day.

This growth is largely due to world oil demand growth this year, which currently reaches 1.1-1.2 million barrels per day according to the Organization of Petroleum Exporting Countries (OPEC), the Energy Information Administration (EIA) and the International Energy Agency (IEA).

The calculations also show that China accelerates the storage of crude oil in commercial or strategic warehouses, as well as increasing exports of refined petroleum products from the beginning of the year. This implies much lower growth in the real domestic demand for oil.

China’s crude oil supply data, including imports and domestic production, signaled that between January and May China has set 1.21 million barrels per day in commercial or strategic storage.

The country does not provide data on oil storage, so it’s only an estimate that allows the country to accelerate stockpiling in 2019, with 45% of the oil import growth heading to storage.