Oil was steady following an industry report that signaled another draw in US crude inventories, adding to a tightening supply outlook after Saudi Arabia flagged possible cuts to production.
(Bloomberg) — Oil was steady following an industry report that signaled another draw in US crude inventories, adding to a tightening supply outlook after Saudi Arabia flagged possible cuts to production.
West Texas Intermediate traded near $93 a barrel after rising almost 4% in the previous session. The American Petroleum Institute reported crude stockpiles dropped by 5.63 million barrels last week, according to people familiar. That followed news that exports from Kazakhstan may be disrupted for months.
The market is holding up despite a raft of bearish data. Economic activity has weakened from the US to Europe and Asia, reinforcing concerns that soaring prices and the war in Ukraine will tip the world into a recession. A stronger dollar also added to headwinds for commodities.
The potential revival of a nuclear deal with Iran, which could lead to a surge in exports from the OPEC producer, has also weighed on the market recently. A senior House Republican demanded that the US Congress be given a chance to review any agreement as Tehran and Western powers inch toward an accord.
“Potential OPEC+ production cuts hinted by Saudi Arabia this week has provided a catalyst for buyers,” said Jun Rong Yeap, a market strategist at IG Asia Pte. However, the prospect for a renewed nuclear deal with Iran could drive a knee-jerk reaction in oil prices to the downside, he added.
Oil has lost around a quarter of its value since early June on concerns over an economic slowdown. Saudi Arabia’s Oil Minister Prince Abdulaziz bin Salman said this week that the futures market is increasingly disconnected from fundamentals and the OPEC+ alliance may be forced to cut output.
The gap between prompt Brent futures and the second month contract widened on Tuesday following news of disruptions to Kazakh exports. The spread rose to $1.05 a barrel in backwardation from 67 cents the day before, a bullish signal indicating supply tightness. It was at 94 cents on Wednesday.
The Energy Information Administration will release official figures on US demand and stockpiles later on Wednesday. The API also reported that fuel inventories and supplies at the key storage hub at Cushing, Oklahoma, rose.
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