Oil rises marginally as markets weigh inventory data, US ratings downgrade
BEIJING – Oil prices rose slightly in early Asian trading on Thursday, as markets weighed bullish U.S. inventory data on Wednesday and a likely extension of OPEC+ output cuts against the fallout of Fitch’s downgrade of the U.S. government’s top credit.
Brent crude futures rose 27 cents, or 0.32 percent, to $83.47 a barrel by 0001 GMT, while U.S. West Texas Intermediate crude climbed 29 cents, or 0.36 percent, to $79.78 a barrel.
Both benchmarks had been trading at near their highest levels since April on Wednesday, but closed down 2 percent amid risk-off investor sentiment following the ratings downgrade.
On Tuesday, ratings agency Fitch downgraded the U.S.’s long-term foreign currency ratings to AA+ from AAA, reflecting expected fiscal deterioration over the next three years as well as concerns over a high and growing general government debt burden, political polarization and the international status of the U.S. dollar.
Wall Street’s three main indexes closed lower and Treasury yields rose on Wednesday as uncertainty rippled through financial markets.
Despite the broader bearish sentiment, prices continue to see support from a tightening supply backdrop.
U.S. crude stocks fell by a record 17 million barrels last week as refiners stepped up runs and exports topped 5 million barrels per day (bpd), the Energy Information Administration said on Wednesday.
The inventory drawdown, which dramatically exceeded analysts’ expectations in a Reuters poll of 1.4 million barrels, pointed to global demand outpacing supply as deep cuts from major producers continue.
The next market monitoring committee meeting of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, is to be held on Aug. 4.
Reuters reporting suggests that OPEC+ is unlikely to tweak its current oil output policy, with Saudi Arabia expected to extend their voluntary 1 million bpd cut for another month to include September.
Russia previously announced plans to lower exports by 500,000 bpd in August, with lower shipments from western Russian ports in the first week of August indicating that Moscow is finally making good on its supply cut pledges.