Oil arrested losses near the lowest level in more than three weeks as investors weighed the prospect of shrinking U.S. inventories against more supply from Saudi Arabia and America’s emergency hoard.
Futures in New York were little changed after a 4.2 percent plunge on Monday. Government data on Wednesday is forecast to show U.S. inventories last week dropped further from the lowest level since 2015. Meanwhile, Saudi Arabia is offering extra crude volumes on top of its contractual supplies to some buyers in Asia and the Trump administration is said to be considering tapping into America’s Strategic Petroleum Reserve to cool rising fuel prices.
Oil has tumbled about 8 percent from a 2014 high reached last month on concern that an escalating trade spat between the U.S. and China will crimp global economic growth and reduce demand. Goldman Sachs Group Inc. says U.S. political decisions will stoke oil volatility as investors look for signs that OPEC and its allies are boosting output to offset disruptions from Venezuela to Canada and supply risks from American sanctions on Iran.
“The key lies in the U.S., with investors focusing on the fact that oil prices in New York have plummeted below $70,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “While the U.S. stockpile situation will impact prices, what’s really key is the U.S.’s stance — whether it’s the use of strategic reserves or a clear picture on the renewed sanctions on Iran — to determine the direction of the market.”
West Texas Intermediate crude for August delivery traded at $68.11 a barrel on the New York Mercantile Exchange, up 5 cents, at 12:14 p.m. in Singapore. The contract fell $2.95 to $68.06 on Monday. Total volume traded was about 44 percent below the 100-day average.
Brent for September settlement added 41 cents, or 0.6 percent, to $72.25 a barrel on the London-based ICE Futures Europe Exchange. Prices on Monday dropped $3.49 to $71.84. The global benchmark crude traded at a $5.03 premium to WTI for September.
Yuan-denominated futures fell 1.7 percent to 483.6 yuan a barrel on the Shanghai International Energy Exchange. The contract increased 0.2 percent on Monday.
In the U.S., nationwide crude stockpiles were expected to have dropped by 3.05 million barrels last week, according to a Bloomberg survey of analysts. Inventories had declined by more than 12 million barrels in the previous week, the biggest net decrease since September 2016.
While stockpiles in the U.S. were forecast to continue shrinking and production was curbed in OPEC member Libya, evidence is mounting that Saudi Arabia is heeding U.S. President Donald Trump’s call for the producer group to keep the oil market amply supplied and rein in prices. The Middle East kingdom’s state producer has pitched additional cargoes of its lighter grade to at least two buyers in Asia for next month, according to people with knowledge of the matter.
“Production disruptions and large supply shifts driven by U.S. political decisions are the drivers of this new fundamental volatility,” Goldman analysts including Damien Courvalin said in a July 16 note. “The uncertainty on the magnitude and timing of these shifts has muddied the near-term outlook for oil fundamentals.” — Bloomberg