Not even significant U.S. drawdowns could dispel fear of "lacklustre" demand: File Image/Pixabay
A five day winning streak was achieved on Wednesday as a big drop in U.S. inventories along with U.S. interest rate cuts propelled crude prices upward - although one benchmark still posted a monthly decline and another inched up only a fraction of a percent for July.
Brent rose 45 cents to settle at $65.17 per barrel, which contributed to a monthly decline of 2.1 percent, while West Texas Intermediate gained 53 cents to settle at $58.58 per barrel, contributing to a paltry monthly gain of 0.2 percent.
Traders reacted positively to Energy Information Administration data released Wednesday showing that U.S. crude stockpiles fell for a seventh straight week, by 8.5 million barrels last week compared to analytical expectations for a 2.6 million barrel decrease; the drop has put current inventory levels at the five year average for this time of year.
Daniela Corsini, analyst, Itesa Sanpaulo
World demand remains lacklustre
This came on the heels of the U.S. Federal Reserve cutting interest rates to help return inflation to its 2 percent target; the central bank signaled its willingness to lower borrowing costs further if needed.
Taking a distinct back seat on Wednesday in traders' minds was U.S. and China negotiators completing a round of talks without signs of progress in denting the trade war between the two countries; another meeting will take place in September.
Of the inventory drawdowns, Carsten Fritsch, oil analyst at Commerzbank, remarked, "These are bullish numbers across the board; the renewed large draw in crude oil is remarkable as U.S. oil production bounced back significantly after [Hurricane Barry]."
Presumably, fears in some analytical quarters of a global crude surplus should be kept at bay with the news that the Organization of the Petroleum Exporting Countries (OPEC) pumped 29.42 million barrels per day (bpd) in July, down 280,000 bpd from June's revised figure and the lowest OPEC total since 2011.
Saudi Arabia in particular cut back heavily: its production was pegged at 9.65 million bpd, down from its quota of 10.31 million bpd.
However, healthy U.S. consumption and production curbs elsewhere is apparently not enough to satisfy some experts: "Bulging global oil stocks have failed to decline and the market remains well supplied," said Stephen Brennock, oil analyst at PVM.
Indeed, although analysts such as Fritsch applauded Wednesday's crude market developments, a Reuters survey of 54 economists forecast that Brent would average $67.47 per barrel in 2019, little changed from the $67.59 figure of last month's poll and compared with the $65.88 average so far this year.
Daniela Corsini, analyst at Itesa Sanpaulo, said, "World demand remains lacklustre and is subject to significant risks of downside revisions due to trade war concerns and disappointing macroeconomic data."