Crude oil markets are currently facing a tug-of-war as signs of demand are clashing with rising supply, all underscored by geopolitical risks. At the time of writing, Brent crude trades around mid-$60 while WTI remains steady near $62. Broader economic uncertainties OPEC+ output hikes continue to pressure the oil prices.
On the supply side, OPEC+ is constantly boosting production, aiming for another 547k barrels per day to produce in September. The US production remains elevated but slightly lower from peak of second quarter. It suggests that the producers are adjusting to the price pressures. Meanwhile, geopolitical concerns like America’s threat over India’s purchase of Russian oil may act as an upside risk driver.
The recent EIA inventory report revealed a surprised drop of 3.02 million barrels in US crude stocks for the week ended on Aug 0, which is well below the forecast. The sharp draw coupled with a dip in imports to 6 mbpd and export soaring to 3.3 mbpd signals a strong demand and tightening supply. Key products also experienced a decline, such as gasoline stocks dropped 1.3 mn barrels while distillate fuel stocks fell 565k barrels, positioning well below their five year averages.
Moreover, a higher refinery throughput further increases the use of available crude oil which confluences with the recent crude inventory data, suggesting an upside potential to $70+. However, the rising supply from OPEC+ remains a threat to the oil bulls.
Market participants will continue to monitor the geopolitical developments, API and EIA divergences and traffic signals in major demand zones like India and China. A surprise shift in OPEC+ guidance could shift the sentiment too.
