Brent Price Draws Near $70/Barrel as U.S Stockpile Drops

Brent Price Draws Near $70/Barrel as U.S Stockpile Drops

Brent Price draws close to $70 per barrel on Wednesday after a report says there was a drop in the United States crude stockpile.  The drop reinforced expectations of improving demand ahead of the peak summer driving season, offsetting worries that a possible return of Iranian supply would cause a glut.

Iran in a statement said it is expecting the United States to lift sanctions on the country after putting forward for nuclear deal discussion. This created uncertainties in the oil market as the Organisation of Petroleum Exporting Countries (OPEC) and allies move to raise output incrementally in May.

Oil prices have been swinging up and downward against a $70 resistance level, though Goldman Sachs said the black crude will hit $80 per barrel in 2021. Inventories of commercial crude in the US fell in the weekend, which was more than reversing the build posted a week earlier while prices for the key commodity were moving slightly lower on the day.

In the early morning trade record, the price of Brent jumped 0.2%, to $68.81 a barrel, and U.S. West Texas Intermediate (WTI) crude was up 11 cents or 0.2%, at $66.18 a barrel.

Both benchmarks pared earlier losses after government data showed U.S. crude stocks at the Cushing, Oklahoma storage hub fell last week to the lowest since March 2020.

Refiners also ramped up utilization rates to pre-pandemic levels. Gasoline product supplied rose to 9.5 million barrels per day, a proxy for demand, while distillate demand was also higher. Gasoline consumption generally rises beginning around U.S. Memorial Day – which falls on May 31 this year – when people take to the roads.

Prices found some support from lifting of coronavirus curbs. Analysts have said Iran could provide an additional supply of about 1 million to 2 million bpd if a deal is struck.

Iran and global powers have held talks in Vienna since April to work out steps Tehran must take on nuclear activities and Washington should take on sanctions to return to full compliance with the pact Iran reached with world powers in 2015.

Russia said the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, should consider a possible increase in Iranian output when assessing further steps.

OPEC+ is bringing back 2.1 million barrels per day (bpd) of oil production through July, easing cuts to 5.8 million bpd. Their next meeting is set for June 1.

At noon, Market data shows that West Texas Intermediate crude futures slipped 0.1% to $66 a barrel and Brent dipped less than 0.1% to $68.62. Oil prices had been recovering in recent days amid hopes that rising vaccinations and declining COVID-19 infections in the US would bolster the summer driving season, according to a note from Australia and New Zealand Banking Group.

“The prospects of stronger demand have offset some concern about additional Iranian oil hitting the market,” ANZ said in the Tuesday note. “Negotiations continue over an Iran nuclear deal that could ease sanctions on Iran’s oil exports.”

The EIA said gasoline supplies fell by 1.7 million barrels, about 3% lower than the five-year average for this time of year. A week earlier, gasoline inventories dropped by 2 million barrels. Distillate fuel inventories decreased by 3 million barrels to slide about 8% below their five-year average.

Crude imports dropped by 138,000 barrels per day last week to an average of 6.3 million barrels. Imports averaged about 5.9 million barrels a day over the past four weeks, 0.5% above the prior-year print. Gasoline production averaged 9.7 million barrels a day, down from 9.8 million barrels the week before.

Brent Price Draws Near $70/Barrel as U.S Stockpile Drops