U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher early Friday after posting a dramatic rebound rally the previous session. The markets were boosted on Thursday by a drop in U.S. crude and gasoline inventories, but were still in a position to finish lower for the week on concerns that an OPEC+ impasse could expand global crude supplies.
Oil Prices Rise After Big Draw in US Crude, Gasoline Stocks
Oil prices rose on Thursday, rebounding from early losses after U.S. government data showed a much bigger drop than expected in crude and gasoline inventories.
U.S. crude inventories fell by 6.9 million barrels last week to 445.5 million barrels, Energy Information Administration data showed. Analysts had expected a 4 million-barrel drop.
Gasoline stocks fell by 6.1 million barrels in the week to 235.5 million barrels, the EIA said. Analysts had forecast a 2.2 million-barrel drop.
Concerns About Pandemic Weighs on Prices after Japan Declares State of Emergency
The Olympics will take place without spectators in host city Tokyo, organizers said on Thursday, as a resurgent coronavirus forced Japan to declare a state of emergency in the capital that will run throughout the Games.
Prime Minister Yoshihide Suga said it was essential to prevent Tokyo, where the highly contagious Delta variant of COVID-19 variant was spreading, from becoming a flashpoint of new infections.
“We absolutely must avoid Tokyo being the starting point again of another spread of the infection,” Suga told a news conference.
Bearish Tone Set Early in Week When OPEC+ Talks Collapsed
On Monday OPEC+ announced a breakdown in discussions between major oil producers Saudi Arabia and the United Arab Emirates. The two Gulf OPEC allies are at odds over a proposed deal that would have brought more oil to the market.
Reuters reported, Russia was trying to mediate to help strike a deal to raise output, OPEC+ sources said on Wednesday. Additionally, the United States had high level conversations with officials in Saudi Arabia and the UAE, the White House said on Tuesday.
Crude oil prices are likely to trade sideways-to-lower over the short-run due to the uncertainty surrounding future OPEC+ production hikes. Some traders fear members of the OPEC+ group could be tempted to abandon output limits that they have followed during the pandemic, potentially flooding the market with supply. This is likely the biggest concern driving bullish traders to the sidelines.