Crudes Rally Ahead of OPEC+ Meeting, US Inventory Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied early Wednesday despite preliminary data from the American Petroleum Institute showing U.S. commercial crude oil inventories unexpectedly increased in the final week of July, while OPEC+ ministers signal the coalition might raise oil production in September despite signs of decelerating demand growth in Asia and European Union.

OPEC+ might have to raise oil production next month to avoid the market overheating, according to Kazakhstan energy minister Bolat Akchulakov, who suggested Wednesday morning the coalition is targeting a price corridor of $60 to $80 for the second half of the year. The market widely expected OPEC+ to keep oil production steady or opt for a modest increase at this week's meeting as most members of the coalition are seen to have exhausted their output potential. Reuters survey on Tuesday showed OPEC producers continued to underproduce their quota in July, with output by the 13-member cartel raising output by 310,000 bpd or just 60% of the production target allotted for the month.

Wednesday's OPEC+ meeting follows the end of historic production cuts introduced in April 2020 which are now fully unwound as OPEC+ members return the final 648,000 barrels per day (bpd) of the reduction this month. OPEC+ Joint Technical Committee made no recommendation on Tuesday to raise production targets for September, but it lowered its global surplus forecast by 200,000 bpd this year to 800,000 bpd.

Separately, the American Petroleum Institute reported on Tuesday U.S. commercial crude oil inventories increased by 2.165 million barrels (bbl) during the week ended July 29, missing calls for 700,000 bbl downturn. Stocks at the Cushing, Oklahoma, tank farm -- the New York Mercantile Exchange delivery point for West Texas Intermediate futures -- added 653,000 bbl. Gasoline supply declined 204,000 bbl in the final week of July compared with expectations for a 1.3 million bbl draw. Data also showed distillate inventories decreased 351,000 bbl last week compared with an expected 700,000 bbl build.

In financial markets, global stocks are getting whipsawed early Wednesday as U.S. House Speaker Nancy Pelosi prepared to depart Taipei's Songshan airport in Taiwan, concluding a high-stake visit to the island. While meeting Taiwan's President Tsai Ing-wen, Pelosi pledged "ironclad support for Taiwan's democracy," including matters of security, economic growth, and governance.

"Today the world faces a choice between democracy and autocracy," Pelosi said. "America's determination to preserve democracy here in Taiwan and around the world remains ironclad."

Within minutes of Pelosi's landing in Taiwan Tuesday night, China said it would immediately begin "a series of joint military operations around the island," including using long-range live ammunition in the Taiwan Strait.

"This action is a solemn deterrent against the recent major escalation by the United States on the Taiwan issue, and a serious warning to the 'Taiwan independence' forces seeking 'independence,'" Col. Shi Yi, spokesman for the Eastern Theater Command, said in a statement.

Taiwan has governed independently from mainland China since 1949, but Beijing considers the island as part of its territory. Beijing has vowed to eventually "unify" Taiwan with the mainland. The United States has maintained a "One China Policy" since 1979.

Near 7:45 a.m. EDT, West Texas Intermediate advanced to $95.14, up $0.74, while international crude benchmark Brent contract for October delivery gained to $101.34 bbl. NYMEX September RBOB added 6 cents to $3.12 gallon, while NYMEX September ULSD contract rallied 10.26 cents to $3.4807 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges