EMEA News
Crude Markets Mixed as Russia Lifts Output and Saudi Exports Expected to Drop
Amid numerous indicators that the crude market either is returning or could easily return to oversupply, trading on Thursday was mixed, with U.S. crude rising 1 percent on the strength of falling inventories at the Cushing, Oklahoma hub, and Brent dropping 1 percent due to major producers continuing to lift output.
Traders were also swayed by circumstances in Asia: "Refining margins in Asia are under pressure and some of the Chinese independent refiners have cut back on their processing, which is weighing on the Brent market," said Andrew Lipow, president of Lipow Oil Associates.
West Texas Intermediate rose 70 cents to $69.46, while Brent was down 72 cents at $72.18 per barrel.
WTI's rise is based on the most temporary of circumstances, that U.S. inventories fell 1.8 million barrels, or 6.2 percent, through Tuesday, according to Genscape.
By contrast, Brent's losses on Wednesday were based on an accumulation of events suggesting downward pressure on prices may continue for a lot longer: in addition to news that a worker strike at Norwegian drilling rigs has ended, traders took notice of industry sources telling Reuters that Russia used stocks held in tanks at its Siberian oilfields to help boost crude production in June - a surprising sign of flexibility in a country where adjustments in supply are harder to enact than in other parts of the world.
The sources did not disclose how much of June's 100,000 barrel per day (bpd) increase came from stocks.
And even though Adeeb Al-Aama, Saudi Arabia's governor to the Organization of the Petroleum Exporting Countries (OPEC) reported in a statement that the kingdom expects its crude exports to drop by roughly 100,000 bpd in August (in order to ensure it does not push oil into the market beyond its customers' needs), this too was generally viewed as a sign of production strength.
John Kilduff, founding partner at Again Capital, remarked, "Just because the Saudis are trying to temper the fallout, doesn't change the fact that they are increasing production."
The market received many other signs over the past week that it is headed for a surplus instead of tightening: they include the end of unplanned outages in Libya and Canada, word that China's second quarter GDP growth expanded at a slower pace than expected, and even the notion that Iran may continue supplying India with crude despite the U.S.-imposed sanctions designed to reduce exports to zero.
