Oil futures: September Brent drops below $74.50/b after gasoline stocks build in US
Quantum Commodity Intelligence – Brent prices dropped after the release of the US weekly oil inventory report showed another build in gasoline stocks and a rise in refinery utilization rates.
By 1525 GMT, September Brent was trading at $74.42/b, down from earlier highs above $75.00/b, but still up from its previous settle of $74.28/b, while the spread to August Brent, which was heading to expiry, was $0.52/b.
At the same time, August WTI was trading at $73.30/b, up from its previous close of $72.98/b.
September Brent initially hit $75.32/b (1432 GMT), an intraday high, two minutes after the report's release as the market focussed on the 6.7-million-barrel crude draw, extending six weeks of falls that has reduced inventories 33.7 million barrels since May 14.
But gasoline stocks increased 1.5 million barrels over the week to June 25, and although they dropped 2.9 million barrels a week earlier, total stocks of 241.6 million barrels last Friday were 9.1 million barrels higher than May 21.
Gasoline stocks were last higher the week of June 11 when they reached 243 million barrels, but before that stocks were last higher the week of February 26.
US distillate stocks dropped 900,000 barrels over the week to June 25, but at 137.1 million barrels were up 8 million barrels since May 21.
US refinery rates increased another 0.5 percentage points.
Ahead of Thursday's formal OPEC+ meeting, the producer group's Joint Technical Committee (JTC) saw inventories potentially falling below the 2015-2019 average by end-year, but remains cautious on the spread of the Delta variant of Covid-19.
Speaking after the JTC, OPEC secretary-general Mohammad Barkindo said, "the overall brighter picture in relation to the pandemic recovery efforts has led to significantly improved oil market conditions and prospects for future growth."
In its June edition, OPEC's Monthly Oil Market Report projected global oil demand to rise by 6 mb/d in 2021, while world economic growth is forecast at a rate of 5.5 per cent in the same period.
However, Daniel Hynes, senior commodity strategist at ANZ noted, "Energy Minister, Prince Abdulaziz bin Salman, cautioning it's not clear whether oil prices were rising due to real supply and demand or because of expectations and trajectories that are excessively optimistic."
Goldman Sachs has reiterated its bullish outlook on oil prices in its latest report Tuesday, despite expectations of a production hike from the OPEC+ producer group and the Delta Covid variant potentially denting the demand recovery.
"A 1 million bpd August production hike - leaving 2H 2021 OPEC+ output 0.5 million bpd above our base case - would only represent $2-3/b downside to our $80/bbl Brent forecast, according to our fundamental pricing model."
