NEW YORK: Oil futures dipped and then bounced to trade around even on Thursday after US crude and distillate inventories rose much more than expected, with traders also worried that China’s new Hong Kong security law could result in trade sanctions.
The US Energy Information Administration (EIA) said crude inventories rose 7.9 million barrels in the latest week, exceeding expectations, due to a big increase in imports. Distillate stockpiles rose sharply, as refiners picked up output but overall demand fell.
Oil prices have rebounded in recent weeks on anticipation of improved demand after the coronavirus pandemic sapped worldwide consumption by roughly 30 per cent. Overall investment is dropping and US production cuts are balancing out the supply glut, but demand still has not bounced back entirely.
On its second to last day as the front-month, Brent futures for July delivery rose 13 cents, or 0.4 per cent, to $34.87 a barrel by 11:48 a.m. EDT (1548 GMT). US West Texas Intermediate (WTI) crude rose 17 cents, or 0.5 per cent, to $32.98.
Uncertainty about Russia’s commitment to continuing deep output cuts also weighed on prices. Saudi Arabia and some other OPEC oil producers are considering extending record high output cuts until the end of 2020 but have yet to win support from Russia, according to OPEC+ and Russian industry sources.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group dubbed OPEC+, meets on June 9 to discuss continuing the April supply deal that cut 9.7 million bpd from the market.
Markets are also concerned that Washington could slap trade sanctions on China due to Beijing’s move to impose a new security law on Hong Kong. The United States and other nations said this would threaten freedom and breach a 1984 Sino-British agreement on the autonomy of the former UK-colony.