DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange were little changed early morning Wednesday, with both benchmarks halting losses from the prior two sessions as investors balanced concerns over the health of China's economy against tight supplies from the OPEC+ coalition after Saudi Arabia and Russia extended steep production and exports curbs into September.

The oil complex has recently been caught between the two narratives as signs of tightness in the physical market run against demand fundamentals in the world's second largest economy -- China. Overnight headlines out of Beijing once again point to building pressures in the country's financial and property sectors. Zhongshan International Trust -- a large-scale non-bank lender -- reportedly missed payments on its investment products to three separate companies in what could be a sign of contagion from the deepening property crisis. Missed payments reportedly sparked rare protests from at least dozens of investors who clashed with the police at the Zhongshan headquarters, according to the videos circulated on social media. Earlier this week, China's central bank slashed its key interest rate to the lowest since the early days of the pandemic in 2020 but investors remain skeptical that these measures would be enough to spur business confidence. Oil traders closely monitor the developments around China's property crisis and potential signs of a spillover into the broader economy with Beijing being one of the largest buyers of crude oil in the physical market. OPEC in its Monthly Oil Market Report estimated China's crude imports fell to a six-month low 10.3 million barrels per day (bpd) in July from a near record-high 12.7 million bpd seen in the prior month. China's oil consumption is still forecasted to average 15.7 million bpd this year, an improvement from 14.85 million bpd seen over 2022, and second only to the United States with a 20.48 million bpd of demand growth rate. Consistently poor macroeconomic data out of China is becoming an increasingly bearish headwind for the oil market that has so far been focused on supply-side constraints from the OPEC+ coalition.

Domestically, the American Petroleum Institute reported Tuesday commercial crude inventories plunged by 6.195 million barrels (bbl) during the week ended Aug. 11, far exceeding expectations for a 1.7-million-bbl drawdown. U.S. crude oil inventories currently stand roughly in line with the seasonal five-year average. Stocks at the Cushing, Oklahoma, tank farm -- the inventory hub for the New York Mercantile Exchange delivery point for West Texas Intermediate futures -- declined 1 million bbl. Further details of the report revealed domestic gasoline stocks fell 760,000 bbl versus a prior set of data showing stocks rose 700,000 bbl. Consensus of analysts and traders surveyed by the Wall Street Journal suggested stocks would drop 1.2 million bbl last week. Distillate inventory added 660,000 bbl compared with prior data indicating a drop of 800,000 bbl and expectations for a 100,000-bbl decrease.

Combined gasoline and distillate stockpiles fell by more than 4.4 million bbl in the previous week, pressing inventories well below the seasonal five-year average. Gasoline inventories currently sit 7% below the five-year average at 216.4 million bbl, and distillate stockpiles fell to 115.4 million bbl, some 17% below the five-year average. The U.S. Energy Information Administration will release its latest update on the stock levels with its weekly inventory report at 10:30 a.m. EDT.

Near 7:30 a.m. EDT, West Texas Intermediate September futures on NYMEX were little changed near $81.02 bbl, and ICE Brent for October delivery traded near $84.94 bbl. NYMEX RBOB September futures slipped $0.0027 to $2.8449 gallon, and front-month ULSD futures edged higher to $3.0406 a gallon, up by $0.0126 gallon in overnight trading.

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