Oil Ekes Out Gains But Brent Weakening Versus Other Benchmarks

Brent's premium to WTI has also contracted: File Image/Pixabay

Oil on Tuesday reversed the previous sessions losses, despite news that crude imports to and exports from China – a major indicator of that country's economic health – fell far more than expected in July.

Brent settled up 83 cents at $86.17 per barrel, while West Texas Intermediate settled up 98 cents to $82.92.

According to data from the General Administration of Customs, China's crude imports in July fell 20.8 percent from a year ago, and on a year-to-date basis its overall exports for the first seven months of 2023 fell by 5 percent from a year ago.

Also on Tuesday, government data from India showed that fuel consumption slipped to a 10-month low in July, with diesel sales dipping around 13 percent month-on-month to 6.89 million tons and gasoline sales dropping by 5.3 percent to 2.99 million tons.

However, the losses were attributed mainly to that country's monsoon season limiting mobility, and it was expected that diesel demand would remain subdued in August and rebound in September-October.

Investors on Tuesday took some measure of solace from a monthly report from the Energy Information Administration projecting U.S. crude production to rise by 850,000 barrels per day (bpd) to a record 12.76 million bpd in 2023; crude production is expected to rise by 330,000 bpd to 13.09 million bpd in 2024.

The EIA explained that the forecast increases were the result of higher expected well-level productivity and higher crude oil prices.

Given the volatility of crude trading in recent sessions, Bloomberg on Tuesday noted that Brent "has weakened markedly versus other oil benchmarks in recent days: it's now trading at a rare discount to Middle Eastern Dubai crude as OPEC+ output cuts lift the cost of heavier supplies, while its premium to WTI has also contracted to around the smallest since May."

John Evans, an analyst at PVM, said of Tuesday's trading patterns, "Overlapping, concentric and oppositional influences continue to bring nervousness to our market and oil prices will have to lean again on the state of world inventories to keep its winning ways."