US crude inventory draw fails to offer respite for Brent

The front-month ICE Brent contract has slumped by $3.18/bbl on the day, to trade at $60.12/bbl at 09.00 GMT.

IMAGE: (L-R) Russia, Saudi and US flags against oil pump and oil refining factory at night. Getty Images

Upward pressure:

The US Energy Information Administration (EIA) has reported a 2.7 million-bbl draw in US commercial crude inventories. The draw has defied American Petroleum Institute (API) estimates of a 3.8 million-bbl build.

Saudi Arabia is expected to raise crude oil prices for Asian buyers by $0.3/bbl for June deliveries. This indicates "stable demand" for Middle East crude oil amid the recent oil market weakness, ING analysts said in a note.

Downward pressure:

The looming prospect of oversupply in the global oil market, coupled with fears of a potential slowdown in Chinese oil demand, remain key headwinds for Brent. The benchmark has dropped by nearly $6/bbl over the past week.

Eight OPEC+ members, Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman, have agreed to accelerate the easing of voluntary production cuts and boost the combined output by 411,000 b/d in May, a significant jump from the previously planned increase of 135,000 b/d.

“We see OPEC+ pushing ahead with returning more (even accelerating) barrels onto the [oil] market at the May 5th meeting, despite legitimate demand worries,” energy-focussed hedge fund manager Eric Nuttall said in a social media post.

The US–China tariff war could flip the oil market from a “mild deficit” of 6,000 b/d to a “surplus” of 273,000 b/d in 2025, according to Kpler. The intelligence agency revised China’s crude demand by 160,000 b/d through July, “reflecting peak maintenance and softer refining sentiment amid rising trade tensions.”

By Konica Bhatt

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