(Bloomberg) – Oil rallied after a report on the U.S. industry showed another large drop in crude inventories, indicating market tightening, and China’s central bank added liquidity to appease concerns about a major developer’s debt problems.
Bloomberg’s Most Read
West Texas Intermediate traded above $ 71 a barrel after rising 1.4%. According to the industry-funded American Petroleum Institute, national inventories have sunk more than 6 million barrels, including a drop at the main storage center in Cushing, Oklahoma. The breakdown, which precedes official figures later Wednesday, also signaled a drop in holdings of gasoline and distillate.
Crude is on track for a monthly gain in September after extreme weather conditions disrupted U.S. supplies and a rally in natural gas boosted expectations that demand for oil may benefit from a shift. In Asia, the Chinese central bank injected more short-term liquidity into the financial system, easing concerns over the China Evergrande group crisis and helping industrial commodities.
U.S. crude inventories have contracted this year as the deployment of coronavirus vaccines paved the way for a resumption of mobility, fueling energy use. Inventories fell to their lowest level in two years last week, and a further drop in data on Wednesday could take them back to their lowest level since 2018.
The API report was the main driving force behind the oil gains, said Jeffrey Halley, senior strategist for Oanda Asia Pacific Pte, adding that the natural gas moves were also beneficial. “Oil prices will remain strong,” he said.
ConocoPhillips predicts that demand for oil will return to pre-pandemic levels by early next year as demand increases, chief executive Ryan Lance told Bloomberg Television. Supply, on the other hand, will remain constrained by OPEC + and shale deposits, and as large companies embrace the energy transition, he said.
The spread between the two December contracts closest to Brent rose to $ 6.33 per barrel in offset, an uptrend. The spread swelled to $ 3.34 in mid-August, suggesting traders are more positive about the outlook. The rapid spread was also narrowed, to 82 cents from 68 cents a week ago.
Investors, including in commodities, will also be on alert Wednesday for the results of the US Federal Reserve’s policy meeting. The central bank is expected to move closer to scaling back its massive stimulus package that has been put in place to tackle the economic fallout from the pandemic.
Bloomberg Businessweek Most Read
© 2021 Bloomberg LP