Oil prices rose early on Thursday, extending gains from the previous session following a large draw on USA gasoline inventories.
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Some analysts such as Francisco Blanch, head of global commodity research at Bank of America Merrill Lynch, believe this latest oil price downturn is due to seasonal factors.
October Brent crude LCOV6, -0.05% on London’s ICE Futures exchange rose $1.30, or 3.1%, to $43.10 a barrel.
US commercial crude inventories are expected to show a weekly fall after last week’s unexpected rise in stocks broke a nine-week drawdown, according to a Reuters poll.
Preliminary weekly production data showed that U.S.’ crude production fell flat to less than 8.5 million bpd.
USA crude inventories, however, added 1.4 million barrels last week, compared with market expectations for a decrease of 1.4 million barrels.
Other analysts said high crude and product output would continue to weigh on markets and that as a result, refiners were likely to reduce orders for new crude feedstocks, affecting demand for oil. Since then, traders have become increasingly concerned that demand is not growing fast enough to whittle away near-record inventories of crude oil and petroleum products in the near future.
United States crude stockpiles probably dropped by 1.75 million barrels last week, according to a Bloomberg survey before a report from the Energy Information Administration today.
Short positions in the USA benchmark rose 28%, with an increase of 38,897 futures and options combined, in the week ended July 26, according to the CFTC. Domestic crude oils priced in the Midwest and western Texas are no longer heavily discounted relative to imported crude oils priced in the North Sea.
As the chart below shows, the price of West Texas Intermediate (WTI), the benchmark U.S. contract, dropped from a high of nearly $52 per barrel in early June to less than $40 in early August. Comparing it to the stock of two years ago makes for stellar reading as it rose by 150 million barrels.
That placed oil in a bear market, with prices down over 20 percent from their June peaks.
Refinery crude runs rose by 266,000 barrels per day, EIA data showed.
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“I can give you reasons why I don’t think oil prices are going to collapse…but the momentum is very weak”, he said.
