Oil rebounds 1 percent, U.S. crude stocks in focus
Crude futures rose about 1 percent on Wednesday to recover some ground after steep drops in the previous session, boosted by expectations that U.S. crude stocks could fall for a fourth straight week.
Prices were also supported by comments from western diplomats that a nuclear deal with Iran was unlikely by a June 30 deadline, and the oil producer would not get sanctions relief before the end of the year in the best of cases.
July Brent crude LCOc1 rose 60 cents to $64.32 a barrel by 0651 GMT, while U.S. crude was up 75 cents at $58.78 a barrel. Both contracts fell more than 2 percent on Tuesday after a stronger greenback curbed buying interest in dollar-denominated commodities such as oil.
U.S. commercial crude inventories likely decreased by 2 million barrels last week, a preliminary Reuters survey showed. Declining U.S. stockpiles of crude and oil products in past weeks indicate robust demand in the world’s largest oil consumer, supporting prices. [EIA/S]
“If global demand continues to surprise to the upside and diesel somehow manages to hold value, then crude can surge,” analysts at Energy Aspects said in a note.
However, investors have started taking profits on Brent as hedge funds and money managers cut their bets on rising prices for a second straight week.
“Further unwinding of these positions would remove a key pillar of support to prices,” analysts at BMI Research said in a note.
“This trajectory reinforces our view of downside still to be priced in the oil price in the second half of 2015,” BMI said, adding that they expected Brent to average $59 a barrel this year.
Investors also remained wary of ample supply as top OPEC producers Saudi Arabia and Iraq kept exports near record levels. The Organisation of Petroleum Exporting Countries is expected to keep production steady at its meeting on June 5.
“I am not so bullish on fundamentals,” said a bank trader who declined to be named due to company policy. “Brent could possibly go down to $60 on profit-taking.”
The American Petroleum Institute will release its data on Wednesday at 4:30 p.m. ET, delayed by one day because of the U.S. Memorial Day holiday on Monday, while the Energy Information Administration will publish its data on Thursday at 11:00 a.m ET.