Reversal in Oil Stockpiles Helps Support Crude Prices

A slide in U.S. crude-oil stockpiles is adding to evidence that domestic supply growth could slow moving forward, an encouraging sign for bullish investors with prices still stuck in a tight range.

U.S. crude futures added 1.1% to $56.51 a barrel on the New York Mercantile Exchange Thursday. Prices have generally stayed between $55 and $60 in the past month, supported by continuing production cuts by the Organization of the Petroleum Exporting Countries and its allies but limited by fears of crumbling demand. Brent crude, the global price gauge, added 1% to $63.83 on London’s Intercontinental Exchange Thursday.

While demand fears have limited gains in crude recently, some analysts think further inventory drops could buoy prices moving forward. Figures Wednesday showed domestic stockpiles slid more than 10 million barrels during the week ended July 19 to their lowest level since March. The decline was the sixth consecutive weekly fall in inventories.

The recent stockpile drops mark a reversal from earlier this year, when record output and tepid refinery consumption helped push inventories to their highest level in almost two years. That surge earlier in the year contributed to steep declines in crude prices in late May and early June.

Although analysts caution that Tropical Storm Barry has skewed recent data points by contributing to a fall in production near the Gulf of Mexico, many say a sustained slide could help ease fears of excess supply. Those worries have hurt commodities throughout the year as analysts weigh a slowdown in global growth and uncertainty about U.S.-China trade policy.

Investors say long-term demand worries have overshadowed supply developments in recent weeks, also limiting oil’s response to geopolitical tensions in the Strait of Hormuz, a key crude shipping route.

Oil-market participants were looking ahead to weekly figures on the number of rigs drilling for crude in the U.S., scheduled for Friday. A pullback in the rig count has also helped quell some oversupply fears.

Elsewhere in commodities, natural-gas futures rose 1.3% to $2.248 a million British thermal units on the New York Mercantile Exchange as analysts awaited inventory figures due later Thursday.

In metals markets, most-active Comex gold futures inched up less than 0.1% to $1,423.80 a troy ounce, hovering near a six-year high after the European Central Bank signaled it is readying to cut short-term interest rates for the first time since early 2016. Anticipation of lower rates around the world has propelled this year’s gold rally because the metal becomes more attractive to yield-seeking investors when rates decline.

Most-active Comex copper futures inched up 0.3% to $2.7195 a pound.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

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