Oil down as US data shows oil demand recovery is on slow track

Oil prices declined on Wednesday over forecasts of a limited draw in US crude stockpiles that fell short of market expectations, disappointing investors.

International benchmark Brent crude traded at $79.53 per barrel at 10.27 a.m. local time (0727 GMT), a 0.13% loss from the closing price of $79.63 a barrel in the previous trading session on Tuesday.

The American benchmark West Texas Intermediate (WTI) traded at the same time at $75.45 per barrel, down 0.28% from the previous session’s close of $75.66 per barrel.

Late Tuesday, the American Petroleum Institute (API) announced an estimated decrease of 797,000 million barrels in US crude oil inventories, against the market expectation of a 2.25-million barrel draw.

The findings show that the country’s crude oil demand recovery from pandemic-era lows is taking longer than expected, sending prices lower.

The US Energy Information Administration’s (EIA) data on oil stocks will be announced later on Wednesday, and if the stock decline is confirmed to be lower than estimates, prices could fall further.​​​​​​​

Daniel Hynes, a commodity strategist at Australia and New Zealand Banking Group, said ‘Russia appears to be making good on its promise to reduce supply. Crude loadings are down sharply at three Russian western ports, averaged 1.78 million bpd (barrels per day) in the four weeks to 16 July, according to ship tracking data.’

His comments came after Russian Deputy Prime Minister Alexander Novak said last week that Russian oil companies will decide whether to reduce their oil output or exports in line with the country’s planned cutback in oil exports in August.

Novak reaffirmed on Monday that Moscow will cut oil exports by 2.1 million metric tons for the third quarter, which is roughly equivalent to the pledged cuts of 500,000 bpd.

He added that Russia would cut both pipeline and seaborne oil exports in August.

‘This may be aided by Russian oil losing its appeal to price-sensitive buyers. Its crude is becoming more expensive, resulting in India now considering boosting purchases from traditional sources in the Middle East,’ Hynes said.

Meanwhile, as investors hope for significant stimulus measures from China as the country’s latest economic data signals slower-than-expected growth in the world’s second-largest economy, experts say the figures may not be low enough to trigger large-scale rescue measures from top policymakers.

• American Petroleum Institute (API)
• US Energy Information Administration's (EIA)