Oil prices rose in Asia on Wednesday morning. They were lifted by a drop in U.S. oil supplies, which bolstered forecasts that fuel demand will surpass supply increases. However, an increase in COVID-19 instances around the world limited the black liquid’s rise.
Brent oil futures rose 0.65 per cent to $74. This was after falling 2 cents the previous day, the first drop in six days. WTI futures jumped 0.77 per cent to $72.20, erasing Tuesday’s 0.4 per cent loss.
The American Petroleum Institute’s crude oil supply figures for the week ending July 23 indicated a decline of 4.728 million barrels. Forecasts published by Investing.com expected a 3.433-million-barrel draw, whereas the prior week had an 806,000-barrel increase.
Investors are now waiting for crude oil supply data from the U.S. Energy Information Administration (EIA), which is expected later in the day.
Most energy traders were unimpressed by the previous week’s build, so expectations for the EIA crude oil inventory report to indicate inventories resumed their decreasing trend should be high. According to API statistics, gasoline inventories has also decreased. The United States is still in the midst of peak driving season. Everyone is trying to make the most of this summer, Moya explained. Global inventories are likely to tighten for the rest of 2021 as crucial market countries continue to recover from COVID-19.
However, an increase in the number of cases involving the virus’s Delta form has prompted many countries to reimpose restrictive measures. The black liquid is on track to suffer its second monthly loss since October 2020.
The most significant risk to oil prices
Refiners, who are enjoying some of their most acceptable profits in years, are nonetheless being challenged by the rising number of COVID-19 cases. Concerns that further demand weakness may result in swollen stockpiles and pressure margins impede processors’ eagerness to cash in.
The Delta strain of COVID-19 remains the most significant risk to oil prices, with several nations currently dealing with outbreaks; DBS Bank Ltd. energy sector lead for group research Suvro. However, demand in the United States and Europe should continue to support prices for the time being.
The agreement made by OPEC+ to boost the oil production baselines of five member countries and extend the deal until the end of 2022 has assisted it in overcoming a significant challenge. The agreement will undoubtedly help oil market stability by creating the necessary balance to maintain acceptable pricing levels for the remainder of this year and next.
That shows that the organization has evolved into a regulatory body in charge of oil prices and market equilibrium. Without the group’s efforts, an imbalance can occur, worsening market dynamics. As a result, the most recent agreement is a success by any standard. It has pleased countries with excess production capacity by boosting their output baseline in exchange for accepting other countries that do not desire to increase their output levels. That entails adhering to the OPEC+ agreement by raising monthly output by 400,000 barrels per day from August to the end of the year.