Oil steady as data shows drop in inventories
SINGAPORE: Oil held gains after an industry report showed an unexpected drop in American crude stockpiles, while traders continued to assess simmering tensions between the US and Saudi Arabia over a missing journalist.
Futures in New York rose as much as 0.7% yesterday, advancing for a fourth day. The American Petroleum Institute (API) was said to report inventories fell 2.13 million barrels last week, in contrast to forecasts for a gain in a Bloomberg survey before government data yesterday.
Meanwhile, President Donald Trump said in a tweet that the Saudi crown prince “totally denied any knowledge” of what happened to dissident Jamal Khashoggi, as the US president faces rising pressure to act against the regime.
Crude has increased about 20% this year as concerns linger that demand may outstrip supply with American sanctions on Iran set to be implemented early next month.
While the Organisation of Petroleum Exporting Countries (Opec) and its allies say they remain committed to boosting production, questions remain over their spare capacity.
Meanwhile, geopolitical tensions continue to hound sentiment, with the trade war ongoing between the US and China.
“Prices are rising today (yesterday) as the unexpected decline in US inventory data comes at a time when tensions between the US and Saudi Arabia are boiling,” according to Stephen Innes, Singapore-based head of trading for Asia-Pacific at Oanda Corp. “I’m looking for more disruptions in the Middle East with the tensions. I’m still bullish until data proves me wrong on the supply front” after the start of sanctions on Iranian oil.
West Texas Intermediate (WTI) for November delivery traded 27 cents higher at US$72.19 a barrel on the New York Mercantile Exchange at 2:39pm in Singapore yesterday.
The contract is on course to rise for a fourth day, the longest winning streak in almost two months. Total volume traded was about 19% below the 100-day average.
Brent for December settlement rose as much as 38 cents to US$81.79 on the Londonbased ICE Futures Europe exchange, and traded at US$81.64. The global benchmark crude was at a US$9.64 premium to WTI for the same month.
In the US, a drop in crude inventories as signalled by the API data would be the first decline in four weeks. Analysts in a Bloomberg survey forecast government data to show a 2.5-million-barrel gain.
Meanwhile, stockpiles in the nation’s storage hub of Cushing, Oklahoma, climbed by 1.5 million barrels, according to the API, which would be the fourth consecutive increase if confirmed by the Energy Information Administration’s data.
Traders also continued to assess the tensions between Saudi Arabia and the US, after speculation grew the de-facto Opec leader could deploy oil as a weapon against any punitive measures taken by Trump.
US Secretary of State Michael Pompeo, who met with Saudi Arabia’s leadership, said the regime has demonstrated a “serious commitment to determine all the facts and ensure accountability” after Saudi journalist Khashoggi went missing two weeks ago after entering the country’s consulate in Turkey.