Oil Steady After Two Day Drop
Oil steadied after a two-day decline as investors assessed a surprise gain in U.S. crude stockpiles and indications that China’s economy is being strained by a power crunch.
Futures in New York traded near $75 a barrel after dipping 0.8% over the past two sessions. U.S. crude inventories expanded for the first time in eight weeks, according to government figures, in contrast to a Bloomberg survey where all those polled predicted a drop. China’s factory activity contracted in September for the first time since the pandemic began amid widespread electricity curbs.
Crude is still heading for a monthly gain after the market tightened, in part due to disruptions in the Gulf of Mexico after Hurricane Ida, while surging natural gas prices have raised the prospect of greater demand for oil products for power generation. The global energy crunch is likely feature in OPEC+ talks when the group meets next Monday to discuss its production policy.
“Oil has now moved into a consolidating, wait-and-see state,” said Jeffrey Halley, a senior strategist for Oanda Asia Pacific Pte. “It’s just pausing for a break before it moves higher again.”
Global oil supply is expected to be 1.2 million barrels a day below demand in October and 900,000 barrels a day lower the following month, according to an OPEC secretariat document being reviewed by the group’s Joint Technical Committee. If OPEC+ sticks to its earlier agreed increase of 400,000 barrels a day in November, it’s unlikely to be enough to address demand growth, Vivek Dhar, an analyst with Commonwealth Bank of Australia, said in a note.
U.S. crude inventories expanded by 4.6 million barrels last week, while gasoline stockpiles rose by 193,000 barrels for a second weekly gain, according to the Energy Information Administration. Supplies of distillates -- a category that includes diesel -- increased for the first time in five weeks.
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