Oil prices rebounded in the global commodity market on Thursday, ahead of China’s output statistics announcement later today. Crude prices have fallen after a sell-off on Wednesday. Brent crude increased 0.6% to $80.19 a barrel, while US benchmark WTI rose to $77.41 a barrel.
Prices fell on Wednesday after a surprising surge in U.S. crude oil inventories, with Brent dipping below $80, according to ING analysts Warren Patterson and Ewa Manthey.
However, geopolitical risks remain a concern for the oil market, as it is unknown how and if Iran will retaliate against Israel following the killing of Hamas’ leadership head on Iranian soil, according to ING.
This uncertainty has prompted increased options trading activity, as investors want to protect themselves from significant upside, ING adds.
Oil prices sold off yesterday following a surprise build in US crude oil inventories. ICE Brent fell 1.15% yesterday, settling below US$80 per barrel once again.
The EIA inventory report showed that US commercial crude oil inventories increased by 1.36 million barrels over the last week, very different to the 5.2 million barrel draw the American Petroleum Institute (API) reported the previous day and the first increase since late June.
While crude oil exports increased by 118,000 barrel per day week on week to 3.76 million barrels per day, they remain below the 4-week average of 4.18 million barrels per day, analysts said in Thursday note.
Refined product stocks still edged lower despite refiners increasing utilisation rates by 1pp over the week. Gasoline and distillate stocks fell by 2.89 million barrels and 1.67 million barrels respectively.
Implied demand for gasoline and distillates was stronger over the week, increasing by 78,000 b/d and 80,000 b/d respectively. Despite the gasoline stock draw and stronger implied demand, the prompt gasoline crack continued to edge lower.
However, geopolitical risk continues to hang over the oil market, according to commodities strategists. It is still unclear how and if Iran will retaliate against Israel following the assassination of the political leader of Hamas on Iranian soil.
Market analysts said this uncertainty has led to increased options trading activity with market participants wanting to protect themselves from significant upside. This is most evident in the US$85 per barrel strike for the October and November Brent contracts, according to ING.
Russia has extended its gasoline export ban through until the end of this year. The ban was originally set to expire at the end of August, but the government wants to ensure adequate supply in the domestic market.
While a ban has been in place for several months, the government temporarily allowed exports in July.
A ban on diesel exports would be a bigger concern for global markets, though the deputy prime minister has said there are no plans to extend the ban to diesel. China will release industrial output data for July, which will include crude oil production and refining activity.
The EIA will also release its weekly US natural gas storage report, and expectations are that inventories increased by just 1 bcf over the week, compared to a 5-year average for a 43 bcf increase.
