Oil Prices Edged Higher
Oil prices rose on Thursday after falling in early Asian trade as concerns about global supply tightness overcame an increase in gasoline and distillate inventories in the United States.
The more actively traded contract, Brent oil futures, increased 63 cents, or 0.6 percent. It was trading at $113.08 per barrel at 0250 GMT. The August contract, which expires Thursday, was trading at $116.08, down 18 cents, or 0.2 percent.
West Texas Intermediate (WTI) oil futures in the United States rose 49 cents, or 0.5 percent, to $110.27. Crude oil rose in early trading after an optimistic inventory report. The decrease was caused by refiners boosting throughput due to historically high refining margins. Crude stocks fell by 2.8 million barrels in the week ending June 24. It dropped greatly above experts’ forecasts in a Reuters poll for a 569,000 barrel decline, according to data from the US Energy Information Administration, even as gasoline and distillate stockpiles increased. Fuel stocks soared as refiners increased output, reaching 95 percent capacity for the first time in four years.
However, according to ANZ analysts, fresh supply interruptions boosted prices as Libyan imports were suspended from two main eastern ports. At the same time, Ecuador saw output dip owing to ongoing protests.
Exports of Ecuador’s flagship Oriente crude remain halted due to a force majeure declaration as anti-government protests spread, according to state-run Petroecuador on Wednesday.
However, concerns about slowing economic development kept price hikes in check.
Recent aggressive rate hikes by central banks and a slowing global economic growth have put pressure on commodities prices. Bets for greater US oil reserve release and OPEC’s increase in oil output also dampened the oil market’s positive momentum.
OPEC+ meets with little prospect of pumping more oil
On Thursday, OPEC+ will have its second and last day of discussions. Sources predict the group is unlikely to vote to pump extra barrels into the market beyond August.
OPEC+ decided in early June to increase output by 648,000 barrels per day (BPD) per month in July and August, compared to a previous agreement to add 432,000 BPD over three months. OPEC+ comprises the Organization of Petroleum Exporting Countries and its partners, including Russia.
Washington applauded the producers’ decision in June, after months of Western pressure on OPEC+ to increase output to help down oil prices. This week, French President Emmanuel Macron informed US President Joe Biden that Saudi Arabia and the United Arab Emirates, the only OPEC members with significant spare capacity, can scarcely boost oil output.
Next month, Biden will travel to the Middle East, particularly Saudi Arabia. He will most likely encourage Riyadh to increase production.
At least five OPEC+ members have stated that this week’s conference will be focused on approving August output regulations rather than discussing September.
China Moves to Buy More Russian Oil
China is preparing to take a growing share of sharply discounted Russian crude oil. This may, in theory, free up supplies from other countries and enhance the availability of refined fuels.
In May, the world’s largest oil importer purchased record levels from Russia. Meanwhile, vessel-tracking and port statistics provided by Refinitiv Oil Research indicate a rise in June.
According to official data, exports from Russia were 1.98 million barrels per day (BPD) in May, including seaborne cargoes, and flowed on the East Siberia Pacific Ocean pipeline.
Refinitiv estimates China’s imports from Russia at 2.01 million barrels per day (BPD) in June. Meanwhile, imports from former top supplier Saudi Arabia should fall to 1.44 million BPD from 1.85 million BPD in May. Refinitiv also anticipates China’s overall crude imports to fall to 9.61 million BPD in June. It went down from 10.84 million BPD in May, due to lower refinery run rates caused by slack demand induced by COVID-19 lockdowns in major cities. It indicates that Russia’s share of total Chinese imports will grow to 20.9 percent in June, up from 18.4 percent in May. Meanwhile, Saudi Arabia’s part will fall to 15 percent, down from 17.1 percent in May.
Russian petroleum is currently at a discount to global benchmarks such as Brent. Moscow strives to shift shipments from Europe to Asia following Western commitments to halt buying from Russia following its February 24 invasion of Ukraine.
China appears to be planning to acquire much more Russian oil in the coming months. On June 28, Beijing set new crude import quotas for non-state refiners. It increased the quantity of oil they can buy compared to last year’s restrictions.
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