Thursday 06, September 2018 by Jessica Combes

Oil rises ahead of US stockpile data with crude draw expected


Oil traded near $69 a barrel as an industry report showed US crude inventories declined last week, with government data due later.

Futures in New York erased earlier losses after slumping the most in three weeks on Wednesday amid tumult in emerging markets. The dollar held steady.

The American Petroleum Institute was said to report US crude stockpiles fell 1.17 million barrels last week, despite a 631,000-barrel build at the Cushing, Oklahoma, storage hub. Official data from the US Energy Information Administration is due Thursday, with the nation’s crude inventories forecast to have dropped by 2.9 million barrels, according to a Bloomberg survey.

Crude prices have been caught in a tug of war between bulls and bears in recent weeks as speculation that US sanctions on Iran’s exports will tighten global supplies, countering signs of rising inventories and pledges by other OPEC members to boost output. Amid fear that contagion will spread across emerging markets, concerns are growing that oil demand will weaken as a stronger dollar makes imports more expensive for developing economies.

"The biggest story out there is the continued pain that it is being inflicted on EM bonds, stocks and not least currencies," said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S. "On that basis, crude oil is seeing some selling pressure -- not only from speculative traders who rushed back into long positions last week, but also the continued worry about global and not least emerging market demand growth going forward."

West Texas Intermediate for October delivery traded at $68.84 a barrel on the New York Mercantile Exchange, up 12 cents, at 10:52 a.m. in London. The contract slumped $1.15 to $68.72 on Wednesday. Total volume traded was 23 per cent below the 100-day average.

Brent for November settlement gained 40 cents to $77.67 a barrel on the ICE Futures Europe exchange, after losing 1.2 per cent on Wednesday. The global benchmark crude traded at a $9.09 premium to WTI for the same month.

Countering the emerging-market issue is “the yet unknown impact on Iran’s ability to produce and export," amid looming US sanctions, said Hansen. "These concerns are likely to keep the downside risk on Brent capped at $75."

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