Crude prices broke a three-day losing streak July 24, as West Texas Intermediate rose 63 cents to close at $77.59, and Brent gained 70 cents to close at $81.71. The Alaska North Slope closing price was unavailable as Petroleum News went to press July 25.
U.S. reserves of crude, gasoline and diesel saw bullish drawdowns, sparking an improved outlook for U.S. demand.
Meanwhile, voracious wildfires in Alberta, Canada continued to surge, just as the region heads into the worst of the fire season, hiking the risk of supply disruptions.
"Demand is better than anticipated," Bob Yawger, director of energy futures at Mizuho in New York told Reuters July 24.
"As long as gasoline is doing well, that will support the rest of the market into the short-term future," Yawger said. "Higher distillates demand was the icing on the cake."
U.S. commercial crude oil inventories for the week ending July 19 -- excluding the Strategic Petroleum Reserve -- fell 3.7 million barrels from the previous week to 436.5 million barrels, 5% below the five-year average for the time of year, the Energy Information Administration said in its weekly statistical report.
Analysts' expectations in a Reuters poll called for a 1.6 million barrel draw.
Total motor gasoline inventories decreased by 5.6 million barrels for the period to 227.4 million barrels -- 2% below the five-year average for the time of year, the EIA said. Analysts in the Reuters poll had expectations for a 400,000-barrel draw.
The EIA said distillate fuel inventories were drawn down by 2.8 million barrels on the week to 125.3 million barrels -- 9% below the five-year average for the time of year, versus expectations of a 250,000 barrel rise.
The SPR gained 700,000 barrels for the period to stand at 374.4 million barrels July 19.
A powerful downdraft
Prior to the July 24 gains, crude was trapped in a powerful downdraft.
ANS dropped $1.14 July 23 to close at $81.60, while WTI plummeted $2.82 to close at $76.96 and Brent lost $1.39 to close at $81.01.
On July 22, ANS dropped $1.01 to close at $82.74, WTI fell 35 cents to close at $79.78 and Brent slipped 23 cents to close at $82.40.
ANS plunged $2.24 on July 19 to close at $83.75, as WTI plummeted $2.69 to close at $80.13 and Brent dove $2.48 to close at $82.63.
Gaza cease-fire negotiations between Hamas and Israel eroded some of the wartime premium built into prices, while until the EIA reported gasoline drawdowns, traders were feeling glum about summer driving season fuel demand.
U.S. demand concerns were layered over continued economic doldrums in China, the world's largest oil importer, which casts an outsized effect on world crude demand.
India, the world's third-ranked crude importer and consumer, weighed in for the bears with government data showing crude deliveries in June had fallen to the lowest levels since February, Reuters reported July 24.
A note of forward optimism
ING analysts acknowledged in a note to clients that a crude selloff was underway, but added a dash of optimism, Barron's reported July 24.
"The market is nearing oversold territory, and we still believe that the fundamentals support prices moving higher from current levels over the remainder of the third quarter on the back of a deficit environment," the ING analysts said.
Ceasefire negotiations in the Middle East and the uncertain economic outlook in China are subduing prices, and the rest of the week could see more downward pressure, Rystad Energy's Claudio Galimberti said in comments emailed to Barron's.
Indeed, as Petroleum News went to press, WTI and Brent had given up much of their July 24 gains in early July 25 Asian trading.
"Crude prices in the next few days will largely hinge on economic news from China, the likelihood of U.S. rate cuts and how negotiations progress in the Middle East," Galimberti said, adding that President Biden's decision to drop his bid for re-election hasn't had a material effect on oil markets, "but the U.S. presidential campaign will likely impact oil prices due to the centrality of energy policy on both tickets."
ANS hit a peak for the trading week on July 18, jumping $1.49 to close at $85.99. WTI leapt $2.00 on the day to close at $82.82 and Brent edged 6 cents higher to close at $85.11.
ANS shed $4.39 from its July 18 closing price of $85.99, to settle at $81.60 on July 23.
Iraq, Kazakhstan, and Russian compensation plans
The OPEC Secretariat received compensation plans from Iraq, Kazakhstan, and the Russian Federation for those exporting nations' overproduced volumes for the first six months of 2024 -- January through June, the organization of the Petroleum Exporting Countries said in a July 24 release.
The overproduced volumes totaled some 1.184 million barrels per day for Iraq, 620,000 bpd for Kazakhstan and 480,000 bpd for the Russian Federation, according to assessments made by independent sources approved in the Declaration of Cooperation between OPEC and its allied exporting countries which together form OPEC+, OPEC said.
The entire over-produced volumes will be fully compensated for by September 2025, according to the OPEC Secretariat.
The action arose out of the 37th OPEC and non-OPEC Ministerial Meeting held June 2, which "reiterated the critical importance of adhering to full conformity and the compensation mechanism," OPEC said.
