Oil prices maintained their stability in early Asian trade on Thursday, holding near their 10-month highs. This resilience is bolstered by indications of yet another decrease in U.S. inventories, reinforcing expectations of a tightening global crude supply this year.
Market attention was also directed toward Chinese trade data set to be released later in the day, with a particular focus on crude oil imports by the world’s largest oil importer, China, which is grappling with a gradual economic recovery.
Industry data suggested that U.S. crude stockpiles were likely to have contracted for the fourth consecutive week. This reduction in inventories occurred as refiners increased production in anticipation of peak summer travel demand. The data coincided with the recent announcements by Saudi Arabia and Russia of larger-than-anticipated supply cuts extending until the end of 2023.
These supply cuts sparked a sharp surge in crude oil prices, propelling them to their highest levels since early November. The outlook of tighter global supplies is expected to keep prices elevated in the coming months, offering some resilience to oil markets in the face of potential declines in demand.
Brent oil futures dipped by 0.1% to reach $90.47 per barrel, while West Texas Intermediate crude futures experienced a 0.2% decrease, settling at $87.36 per barrel by 22:49 ET (02:49 GMT).
API Data Reveals Larger-Than-Expected Inventory Draw
The American Petroleum Institute (API) reported that crude stockpiles had shrunk by 5.5 million barrels (mb) during the week ending on September 8. This draw exceeded expectations, as forecasts had predicted a reduction of only 1.4 mb. The substantial weekly draw followed an even more sizable reduction of 11.5 mb for the week ending on August 25.
Typically, the API data serves as a precursor to the Energy Information Administration’s inventory report, slated for release later in the day. U.S. refiners had bolstered production in recent months to meet the heightened fuel demand associated with the summer season, characterized by increased travel.
The sustained weekly inventory draws contribute to the anticipation of tighter global supplies for the remainder of the year, particularly in light of the substantial Russian and Saudi supply cuts that exceeded expectations.
However, some investors have raised questions about the sustainability of the steady inventory draws in the coming weeks, considering that U.S. fuel demand traditionally wanes after the Labor Day holiday.
China Trade Data Awaited with a Focus on Oil Imports
Regarding demand, market participants have turned their attention to the upcoming release of trade data from China. Overall, it is anticipated that imports and exports in August will have declined at a slower rate.
Of particular interest is China’s oil imports, especially following the sharp drop in crude shipments to the country in July. Chinese refiners had been accumulating substantial inventories during the first seven months of the year, contributing to the country’s high oil imports. However, this trend could change in the coming months, especially if economic conditions deteriorate.
Recent economic indicators have suggested that China’s economy remained under pressure throughout August, adding a layer of uncertainty to the country’s future oil imports.
