Oil futures: Brent up 1.5% on tighter supplies, Russia flags OPEC+ cuts
Quantum Commodity Intelligence – Crude oil futures Thursday were climbing higher, consolidating the week's steady gains and shrugging off concerns over China's economy as markets again faced a number of conflicting signals.
Nov23 ICE Brent futures were trading at $86.70/b (1910 GMT), compared to Wednesday's settle of $85.24/b, while Oct23 expired at $86.86/b.
At the same time Oct23 NYMEX WTI was trading $83.47/b versus Wednesday's settle of $81.81/b, boosted by a late bull-run heading into the day's close.
Oil prices rallied after Russia's Deputy Prime Minister, Alexander Novak, said at meeting held by President Putin that Moscow has agreed with OPEC+ on a new deal to reduce supplies.
"Yes, we have reached an agreement. But we will publicly announce the main terms next week," he said, answering Putin's question whether the government managed to agree with OPEC partners on reducing Russian oil supplies to foreign markets.
Expectations were already pivoting towards key OPEC+ producers extending cuts for at least another month after Novak indicated Wednesday Russia could maintain curbs on oil exports into October.
"We are currently monitoring the situation, estimating the market together with our colleagues from other countries. We will rely on the market's requirements," Novak told reporters.
The comments come amid growing speculation that Saudi Arabia could also extend its own additional voluntary cuts, having pledged to reduce production by 1 million bpd from July to September, taking its output down to around 9 million bpd.
Inventories
Global crude benchmarks were also given a lift by this week's EIA data, which showed US commercial crude stocks fell 2.4% to the lowest level this year as imports fell and exports increased.
Inventories dropped by 10.6 million barrels over the period to 422.9 million barrels, the lowest level since the last week of December.
"Crude oil inventories at Cushing also saw further declines, falling by 1.5 million barrels, which takes crude oil stocks at the WTI delivery hub to below 30 million barrels and to a level last seen in January," noted Warren Patterson, head of ING's commodity research.
However, the crude draw was partly negated as US distillate fuel stocks built for a second week and demand slumped to 5% below year-ago levels. Distillate inventories reached 117.9 million barrels, 6% above year-ago levels.
The most liquid October NY Harbor ULSD futures fell over 1% after the report came out on Wednesday, down nearly 3% on the day and around a one-week low.
On the macroeconomic front, more bad news came from China, as manufacturing activity showed little sign of improving despite pledges from Beijing to boost the ailing economy.
"A continued deceleration in the service sector's recovery, paired with a minor easing in the contraction of the manufacturing industry, falls short of constituting a substantial brightening of the broader economic landscape," said Stephen Innes, managing partner SPI Asset Management.
The official manufacturing purchasing managers' index (PMI) edged up to 49.7 in August from 49.3 in July, but it remained in contraction territory for the fifth consecutive month, according to Thursday's release from the National Bureau of Statistics.
The property crisis also continued to spiral as Country Garden, one of China's largest developers, became the latest real estate giant to warn it could default, posting a record $6.7bn loss for the first six months of the year.
