Oil steady after longest rally since June with stockpiles easing

Oil was steady near $41 a barrel in New York after the longest run of gains in six weeks on signs US crude stockpiles extended declines.

The American Petroleum Institute reported crude inventories dropped by 8.59 million barrels last week, with gasoline stockpiles resuming draws, according to people familiar with the figures. Meanwhile, futures rose 1.7% on Tuesday after a massive blast at Lebanon’s main port rocked Beirut, raising concerns about fresh instability in the Middle East. Authorities didn’t immediately say whether it was an accident or an attack.

Oil has struggled to maintain its momentum after rallying from a plunge below zero in April as rising coronavirus infections raised concerns about a sustained recovery in consumption. OPEC+ is set to test the market by returning supply this month after historic output curbs, while Saudi Aramco is poised to delay the release of its official selling prices for September as producers face pressure to reduce the cost of their crude with demand ebbing.

“Oil prices will really struggle to move higher from here over the next month or two,” said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group, adding that mobility data in the US needs to improve significantly to generate confidence in a recovery. Aramco’s delay in announcing its selling prices also shows that they “want to get a better sense of customer demand” as production cuts ease, he said.

Prices

West Texas Intermediate for September delivery fell 0.3% to $41.59 a barrel on the New York Mercantile Exchange as of 10:28 a.m. Singapore time after adding 4.5% in the previous three sessions

The Energy Information Administration is expected to report on Wednesday that US crude stockpiles decreased by 3.35 million barrels last week, according to a Bloomberg survey. That would be the third weekly drop in four weeks.

The blast in Lebanon, caused by highly explosive materials at the port, overwhelmed hospitals with thousands of injured and dozens killed. It comes at a time when the country is suffering its worst ever economic crisis and is in talks with the International Monetary Fund for a bailout. Gulf countries have been wary of supplying aid to Lebanon due to fears the funds could be channeled to Hezbollah, an Iranian-backed militant group.

© 2020 Bloomberg