Oil futures: Crude surrenders gains, Brent eases below $79/b

Quantum Commodity Intelligence – Crude oil futures Wednesday were in retreat, with markets so far this week torn between conflicting pricing signals and making for volatile trading conditions.

Front-month Oct24 ICE Brent futures were trading at $78.85/b (1630 GMT), compared to Tuesday's settle of $79.55/b, with prices now back below Friday's closing levels.

At the same time Oct24 NYMEX WTI was trading at $74.75/b versus Tuesday's settle of $75.53/b, having also surrendered early-week gains. 

Markets had opened the week on a firm footing after an escalation in geopolitical tensions, but rowed back during the following session as focus pivoted back to sluggish demand growth and the planned Q4 production increases from OPEC.

"Refinery margins, the key driver for crude demand, remain weak, leading to lower prices, potentially worsened by the prospect for rising non-OPEC and, not least, OPEC+ supply as the group begins to unwind voluntary cuts," said Ole S Hansen, Head of Commodity Strategy at Saxo Group.

Risk

Nevertheless, geopolitical risks continue to lend some support, including Libya's eastern government declaring force majeure on oil production and exports in a row with its Tripoli-based rival over control of the central bank.

According to local reports, the El-Feel field was the first to suspend production, although other fields were also expected to start winding down.

Tensions in both the Middle East and Eastern Europe remain elevated, further underscoring oil prices.

Meanwhile, US commercial crude oil stocks extended the summer trend of lower stockpiles, posting an eighth draw in the last nine weeks, according to data released Wednesday by the Energy Information Administration (EIA).

However, commercial inventories were a modest 846,000 barrels lower through the week to 23 August, missing expectations of a drop of 2-2.5 million barrels in a pre-release poll published by Reuters.

Late Tuesday, inventory data from the American Petroleum Institute revealed a drop in crude stockpiles of 3.4 barrels, just beating expectations for a draw of 3 million barrels.

The API also calculated a 1.86 million drop in gasoline inventories, while distillates fell 1.4 million barrels.