Oil Mixed as Global Refineries Margin Face Pressure
Oil prices diverged in the global commodities market amidst multiple uncertainties facing energy economies. Latest data indicates that US crude inventories increased, suggesting slowdown in American demand amidst expectation that Fed could cut rates in September.
Meanwhile, the ongoing discussions that could result to ceasefire in Middle East could boost the supply side. ICE Brent crude rose 0.1% to $77.26 per barrel. However, West Texas Intermediate (WTI) fell 0.04% to $73.14 per barrel, after closing at $73.17 in the prior session.
According to estimates, there is a higher likelihood that the Fed will implement a 25 basis point rate cut in September. However, uncertainty persists regarding the monetary policy actions that may be taken through the end of the year.
The American Petroleum Institute numbers overnight showed that US crude oil inventories increased by a marginal 347,000 barrels over the last week, while crude stocks at Cushing fell by 648,000 barrels.
Inventory draws were also seen in products with gasoline and distillate stocks declining by 1.04 million barrels and 2.25 million barrels respectively.
The more widely followed EIA report will be released later today and the market expects a decline of around 2.2m barrels in crude oil inventories, ING note reads.
Moreover, ongoing geopolitical conflicts in the Middle East continue to influence upward price movements by fueling market players’ supply fears.
The Palestinian news agency WAFA reported that, three Palestinians were injured on Tuesday in separate incidents involving Israeli army gunfire and attacks by illegal settlers across the occupied West Bank.
For months, the US, Qatar and Egypt have been trying to reach an agreement between Israel and Hamas to ensure a hostage swap deal and a cease-fire and allow humanitarian aid to enter Gaza.
However, mediation efforts have stalled due to Prime Minister Benjamin Netanyahu’s refusal to meet Hamas’ demands to end the war.
An informed Israeli source told public broadcaster KAN that Netanyahu continues to put obstacles before prisoner swap deal with Hamas.
Meanwhile, both benchmarks experience downward pressure with data released late Tuesday by the American Petroleum Institute (API) showing a 347,000 barrel increase in US crude oil inventories, against the market prediction of a 2.8 million barrel draw.
The increase in the US commercial crude oil reserves supported downward price movements by reflecting market perceptions of a weaker domestic demand.
Official figures from the Energy Information Administration (EIA) are scheduled for later in the day. If a rise in crude oil inventories is confirmed, prices are likely to fall further.
Oil prices remain under pressure since the beginning of the week after bearish tone that started in recent times. ICE Brent continues to trade sub-$78/bbl, having traded to more than $82/bbl early last week.
Hopes of a cease-fire between Israel and Hamas have weighed on oil, along with lingering demand concerns, ING commodities strategists Warren Patterson and Ewa Manthey said in a note.
Analysts noted that while weaker Chinese demand has been well reported, refinery margins around the globe have been under pressure for much of August, suggesting that these demand concerns are not isolated to just China.
The weakness in the oil market leaves OPEC+ in a difficult situation, according to ING. Currently, they are set to start gradually unwinding supply cuts from October.
However, the negative sentiment in the market may make the group think twice about sticking to this plan.
Commodities strategists at ING said, unfortunately for OPEC+, the global oil balance is set to be looser next year, suggesting that plans to ease cuts through 2025 may also have to be revisited. #Oil Mixed as Global Refineries Margin Face Pressure
