Crude expands, Brent consolidates above $85.50/b

Quantum Commodity Intelligence – Crude oil futures edged higher in Asian trading hours on Thursday as the benchmarks consolidated their mid-week rally.

First month September 24 ICE Brent futures were trading at $85.66/b (0720 GMT), compared with Wednesday’s settlement of $85.08/b.

At the same time, August 24 NYMEX WTI trade at $83.68/b, versus Wednesday’s settlement of $82.85/b. The more liquid contract on September 24 was trading at $82.11/b.

Prices rebounded from earlier-week declines after the latest EIA report revealed that US crude stockpiles retreated for a third straight week despite reduced net trade flows and lower production rates .

Commercial inventories fell by 4.87 million barrels in the week to July 12, beating expectations for a much smaller decline of about 1 million and adding to a draw of more than 15 million barrels over the past two weeks.

However, crude oil’s retreat was somewhat offset as US gasoline inventories rose by more than 3 million barrels last week after Hurricane Beryl swept through Texas, reducing refinery run rates and also the request.

Markets also rose midweek when Russia indicated it would make further cuts in crude output this summer and next to make up for overproduction against its OPEC+ quota in the first half of 2024.

Curbs will be made in the summer months when domestic demand is lower, with heating oil consumption rising in the winter months.

Compensation

It comes as Russia, Iraq and Kazakhstan are set to submit revised plans to cut offsets to the OPEC Secretariat, which have been extended until September 2025, although details have yet to be announced.

In June, Russia led the OPEC+ cuts, cutting output by 140,000 bpd to 9.1 million bpd as it switched from promised export cuts to production cuts. However, it was still 120,000 bpd above target.

Oil markets also received a boost after the US dollar index fell below 104 points for the first time since March, making USD imports cheaper.

But amid broader oil prices, diesel margins fell to their lowest point since mid-June in northwestern Europe as weak industrial demand combined with a well-supplied market.

Northwest European ULSD cargoes fell to around $20/b against ICE Brent crude this week, down from a peak of around $23.50/b earlier in the month and the lowest in June 12.