Oil Futures Rally on Eyed Crude Draw, Saudi Oil Exports

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Following a two-session selloff triggered by China's softer-than-expected economic data, oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced more than 1.5% on Tuesday amid expectations for EIA data to show U.S. commercial crude and gasoline inventories declined last week. Further lifting the petroleum complex, figures from Saudi Arabia -- the world's top oil exporter -- showed a sizable drop in its seaborne crude flows during the month of May.

Tuesday afternoon, oil traders positioned ahead of inventory data from the American Petroleum Institute, scheduled for 4:30 p.m. EDT release, followed by an official report from the U.S. Energy Information Administration Wednesday morning. U.S. commercial oil stockpiles are expected to decline 1.8 million barrels (bbl) during the week-ended July 14 after inventories spiked by 5.9 million bbl in the prior week. Currently, commercial crude-oil inventories stand about 1% above the five-year average. The expectations for a drawdown are in part due to the data released Monday from the U.S. Energy Department showing no transfer occurred last week from the Strategic Petroleum Reserves to the commercial side. In the fuel complex, analysts expect gasoline inventories to have fallen by 1.1 million bbl in the reviewed week, while distillate stockpiles are seen building by 200,000 bbl.

Traders will also closely monitor demand figures in this week's EIA report after fuel consumption was shown to have nosedived by 1.7 million barrels per day (bpd) during the week ended July 7.

Also on Tuesday, investors assessed export figures from Saudi Arabia, showing its seaborn flows dropped by 388,000 bpd in May to 6.93 million bpd -- the lowest level since October 2021, according to data published by Riyad on the Joint Organizations Data Initiative (JODI) platform. Saudi oil production was also shown to have dropped by 502,000 bpd to 9.96 million bpd -- two months prior to the introduction of a voluntary 1-million-bpd production cut. The fresh data out of Riyad suggests the kingdom is rapidly decreasing available supplies on the global market to meet production cuts announced in the OPEC+ accord. The deal calls for the 23-member alliance to decrease supply by a massive 3.6 million bpd this year, with Saudi Arabia and Russia responsible for the lion's share of those curbs. Data out of Russia has always been murky and became even less accessible after Moscow stopped publishing official figures in the aftermath of the invasion of Ukraine. However, Russian Energy Minister Alexander Novak reiterated on Monday that Moscow will cut oil exports by 2.1 million metric tons for the third quarter, which would be roughly in line with cuts of 500,000 bpd. "Russia will cut both pipeline and seaborne oil exports in August." added Novak. The latest tanker tracking data supports this view, showing Russian crude-oil exports declined markedly during the first weeks of July.

On the session, front-month West Texas Intermediate on NYMEX topped $75 per bbl, gaining $1.60 per bbl, and ICE September Brent contract advanced $1.13 to settle at $79.63 per bbl. NYMEX August RBOB futures rallied $0.0627 to $2.6944 per gallon, and August ULSD futures moved up to $2.5994 gallon, up by $0.0352 on the session.

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

Liubov Georges