Oil futures: Crude steadies following sharp US inventory drawdown
Quantum Commodity Intelligence – Oil futures Wednesday were edging higher following US data which revealed a sharp drop in crude stockpiles, coming after prices had rowed back in the previous session from two-month highs.
Front-month Sep24 ICE Brent futures were trading at $86.52/b (1630 GMT), compared to Tuesday's settle of $86.24/b.
At the same time Aug24 NYMEX WTI was trading at $83.06/b, versus Tuesday's settle of $82.81/b.
However, market reaction to the latest Energy Information Administration (EIA) was relatively underwhelming, coming after commercial inventories were marked 12.157 million barrels lower through the week to 28 June.
Markets had already nudged higher in earlier trade after a report from the American Petroleum Institute revealed crude inventories fell by more than 9 million barrels last week, which analysts said left little room for further upside after the EIA release.
Benchmarks had started the week on a firm footing, underpinned by heightened geopolitical risks and concerns over a lively hurricane season, after Beryl was declared the earliest-ever Category 5 superstorm.
Geopolitical
"Yet storm risk is taking a back seat to geopolitical risk factors and signals of the potential for record breaking holiday demand. Not only do we have US military bases on high alert for a credible threat of terror attack now we have the Iranian backed Houthi rebels daring the US to defend international waters," said Phil Flynn of The Price Futures Group.
The US National Hurricane Center also said that modelling indicates the storm will begin to deteriorate as Beryl encounters moderate-to-strong vertical wind shear.
The storm will also weaken as it makes landfall on the Yucatan peninsula as a low-category hurricane before emerging as a tropical storm over the Gulf of Mexico, while some models have landfall in southern Texas.
Meanwhile, Iraq shows little sign of reducing output to its agreed 4 million bpd OPEC target, let alone implementing any compensation cuts.
"Iraq had pledged to reduce its production to the agreed level and to compensate for the overproduction accumulated to date with larger production cuts. There is still no sign of this," said Carsten Fritsch of Commerzbank, referencing June survey figures.
"Any assurances from Iraq that it will cut production and adhere to the agreed terms should be viewed with great skepticism after the repeated violation of its promises," added Fritsch.
