Oil futures: Crude rebounds on US stocks draw, counters China gloom
Quantum Commodity Intelligence – Crude oil futures Wednesday were lower amid increasing gloom over China and the prospect of a further rate hikes in the US and Europe, but staged a strong rebound after US data showed a sharp draw in stocks.
Front-month Oct23 ICE Brent futures were trading at $83.30/b (1835 GMT), compared to Tuesday's settle of $84.03/b and having earlier challenged three-week lows of below $82/b.
At the same time Oct23 NYMEX WTI was trading $78.95/b, versus the day's low of $77.64/b an Tuesday's settle of $79.64/b.
A larger-than-expected drop in US crude inventories last week underpinned the price rebound, with stocks dropping to an eight-month low even as domestic oil output hit a fresh post-Covid record and exports eased.
Weekly figures from the US Energy Department's Energy Information Administration (EIA) published Wednesday showed private inventories of crude oil in the country falling by 6.1 million barrels last week.
However, China's growing debt problems across the property sector continued to weigh heavily on the broader economy, with over 50 real-estate developers said to have defaulted or suspended payments on bonds, while possible contagion in the banking sector also weighed.
"Barring a major oil supply upset somewhere, what happens in Beijing – signs of stronger stimulus and a firm response to struggles in the financial and property sectors – is the crucial deciding factor for oil prices up to December," said Robin Mills, CEO of consultancy Qamar Energy.
A lack of stimulus from Beijing has also compounded fears, with authorities earlier this week lowering the one-year loan prime rate by just 10 bps to 3.45%, while the 5-year loan prime rate was unexpectedly left unchanged.
Meanwhile, the central-bankers gathering later this week at the at the Jackson Hole symposium should deliver clues on the state of western economies.
Europe
Europe continues to flag warning signs and while the manufacturing sector contraction slowed down last month, the services sector saw a downturn in August, latest data from HCOB's latest purchasing managers index survey showed Wednesday.
The Eurozone's PMI edged up to 43.7 in August versus 42.7 in July, while the bloc's Services PMI slumped to 48.3 in August from 50.9 seen in July, a 30-month low.
Crude markets have broadly found support over the summer from Saudi Arabia's 1-million-bpd voluntary cut, along with Russia curbing exports, but Iran ramping up production has acted as a counter to some extent.
Crude earlier shrugged off data released late Tuesday by the American Petroleum Institute that revealed a 2.4-million-barrel fall in commercial crude oil stocks, which included a 2.2-million-barrel drawdown at the key Cushing storage hub.
However, a 1.9-million-bpd build in gasoline inventories neutralized the crude draw, while API distillate stocks were little changed.
