Crude oil prices reported a weak growth on Wednesday after the sharp decline in the previous session. The market is backed by the extension of the OPEC+ quota deal, but gains are limited by the fears that the slowdown in the global economy may lead to shrinking demand. An additional effect on the market was also the expected decline in crude oil reserves in the United States.
The futures on US crude oil WTI appreciate by 0.27% to 56.40 USD per barrel, while the Brent variety recorded an increase of 0.26% to 62.56 USD per barrel. Both varieties lost more than 4% of their value on Tuesday, as worries about the slowdown in the global economy have taken advantage over the OPEC’s decision.
OPEC+ reached an agreement at the beginning of the week to prolong oil constraints until March 2020 after the members of the organization overcame their differences to support prices.
Meanwhile, the American Petroleum Institute reported that crude oil stockpiles in the United States dropped by 5 million barrels last week, well above the expected 3 million barrel shrinkage.
According to the analysts of Citi, OPEC’s agreement should lead to further cuts in the US inventories in the second half of the year and bring the prices up.
Still, the signs of slowing global growth are worrying investors, especially after the series of disappointing production data from various parts of the world and the US threat to impose more duties to the European Union imports.
Meanwhile, Barclays expects the crude oil demand to grow at its slowest pace since 2011, with a rise of less than 1 million barrels per day this year. Morgan Stanley, however, lowered its long-term forecast for Brent’s price on Tuesday from 65 USD to 60 USD per barrel.
The crude oil price growth on Wednesday are also limited due to signs of a recovery in Venezuelan oil exports in June, as well as the increase in production in Argentina in May.
Venezuela exported 1.1 million barrels per day of crude oil and refined oil products in June, up by 26% from May, thanks to higher shipments under oil-for-loan deals with China. According to the oil company’s documents, China accounted for 59% of Venezuela’s oil shipments last month, with India and Singapore a distant second and third, with 18 percent and 10% of Venezuela’s oil exports, respectively.
US crude oil inventories
The American Petroleum Institute (API) reported another large crude oil inventory draw of 5 million barrels for the week ending June 27, a more ambitious draw than analysts had predicted, at 2.484-million barrels.
Last week, the API reported a draw of 7.55-million barrels. A day later, the EIA estimated that US inventories had drawn down by a much larger 12.8 million barrels.
The net build is 21.69 million barrels for the 27-week reporting period so far this year, using API data.
The API this week reported a 387,000-barrel draw in gasoline inventories for the week ending June 27. Analysts estimated a larger draw in gasoline inventories of 2.175-million barrels for the week.
Distillate inventories fell by 1.7 million barrels for the week, while inventories at Cushing rose by 882,000 million barrels.
The US Energy Information Administration report on crude oil inventories is due to be released on Wednesday at 10:30 a.m. EST.
The EIA data are expected to show crude inventories fell by 3.7 million barrels last week, according to a survey of analysts conducted by S&P Global Platts. The survey also forecast declines of 2.4 million barrels for gasoline and 1.4 million barrels for distillates.