July 3 2024: Oil prices steadied on Wednesday following a higher trading session spurred by a larger-than-expected drawdown in U.S. crude stockpiles. However, economic headwinds from China and the eurozone capped gains.
Brent crude futures edged up 14 cents, or 0.16%, to $86.38 a barrel by 1318 GMT. U.S. West Texas Intermediate (WTI) crude futures also gained 14 cents, or 0.17%, to $82.95.
Both benchmarks reached their highest levels since April in the previous session but closed in negative territory after the U.S. National Hurricane Center announced that Hurricane Beryl was expected to weaken into a tropical storm before entering the Gulf of Mexico this week.
“The current path looks set to avoid key infrastructure in the Gulf of Mexico,” said Panmure Gordon analyst Ashley Kelty, regarding the potential risks to supply disruption.
U.S. crude oil inventories fell by 9.163 million barrels in the week ending June 28, according to market sources citing American Petroleum Institute figures on Tuesday. However, gasoline inventories rose by 2.468 million barrels, and distillates fell by 740,000 barrels.
“This decline in crude levels might just have saved more of a sell-off after the hurricane news,” PVM Oil analyst John Evans noted in a statement.
Analysts in a Reuters poll had expected a draw of 700,000 barrels from crude inventories, a 1.3 million barrel drop in gasoline stocks, and a 1.2 million barrel fall in distillate stocks. The Energy Information Administration is set to release its weekly data at 1430 GMT.
Traders are also focusing on U.S. gasoline demand, which is expected to increase as the summer travel season picks up with the Independence Day holiday this week. The American Automobile Association has forecast that travel during the holiday period will be 5.2% higher than in 2023.
Elsewhere, surveys indicated that China’s services activity expanded at the slowest pace in eight months, and confidence hit a four-year low in June. Additionally, overall business growth across the eurozone slowed sharply last month.
OPEC output rose for a second consecutive month in June, a Reuters survey found on Tuesday, as higher supply from Nigeria and Iran offset the impact of voluntary supply cuts by other members and the wider OPEC+ alliance.
“OPEC+ was reported to have increased production in June despite pledges to keep quotas in check through the third quarter, and lingering concerns over a tepid recovery in China sent a bearish signal,” Kelty added.
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