After a two-day decline, oil stabilized due to new industry estimates which indicated US inventories may be lower than was thought, potentially pointing to a tighter market.
West Texas Intermediate settled at about $81 per barrel, after falling about 2.6% in the first two sessions of this week.
According to people familiar with the figures, the American Petroleum Institute is indicating that last week, nationwide stockpiles of crude fell by 6.2 million barrels. At the key Cushing, Oklahoma storage hub, inventories are believed to have fallen to the lowest levels since April.
Despite voluntary supply cuts implemented by key producers in OPEC+, Saudi Arabia and Russia, and estimates that global crude consumption is at record highs, this week has seen oil backtrack off of concerning data coming out of China. Disappointing economic data from the world’s second largest consumer of oil has seen banks cut growth estimates, as the nation’s massive real estate sector, responsible for 20 percent of the nation’s GDP, has floundered under a credit contraction and reduced demand.
Yeap Jun Rong, market strategist at IG Asia Pte. said that despite the new figures from the API, “With the disappointing turn in China’s economic data dominating headlines lately, sentiments around oil prices are being kept in check.” The official data on the US stockpile will be released later on Wednesday.
Commodities in general have been faced with a headwind as the US dollar has grown stronger, and a Bloomberg gauge of the dollar predicts there will be a sixth consecutive session of gains. As a result overseas buyers, who have to first convert their currency into dollars, will see raw materials appear more expensive.
As crude benchmarks have declined, timespreads have narrowed in recent trading sessions. WTI’s two-nearest contracts have seen the gap between them reach 50 cents per barrel in backwardation, compared to the 76 cent per barrel intra-day peak last week. However the backwardation would imply a tighter market, consistent with the fall in inventories.
