Crude oil remains stable with US inventory trends and OPEC+ production cuts in focus

Oil prices firmed up after mixed U.S. inventory reports, but OPEC and the IEA offered contrasting outlooks for global oil markets.

Brent crude oil traded around $83 a barrel after rising nearly 1% on Tuesday. West Texas Intermediate continued its seven-day rally above $77. The industry-funded American Petroleum Institute reported that U.S. crude oil inventories rose by 8.5 million barrels last week, according to people familiar with the data. Still, the report also noted that gasoline and distillate oil holdings are declining.

OPEC officials said on Tuesday that global oil demand is expected to expand strongly, but the group's monthly outlook revealed limited compliance by member countries with the latest round of supply cuts. Ta. Meanwhile, the Paris-based International Energy Agency warned that markets are comfortable this year as supply is expected to grow faster than meeting global consumption.

Although WTI's recent rise indicates upward momentum, oil prices have struggled to break out of being confined to the $10 range so far this year. Production cuts by members of the Organization of the Petroleum Exporting Countries and their allies, as well as tensions in the Middle East, are supporting prices. Still, concerns about rising supplies from the former OPEC+ and demand growth in China capped gains.

Vishnu Varasan, Head of Economics and Strategy Asia at Mizuho Bank, said: “The US economic exceptionalism, backed by strong consumption, is supported to some extent by OPEC's view of strong demand supporting oil demand.'' Ta. “Despite the IEA's more optimistic view of the balance between supply and demand,” he added.

The spread suggests that the situation is tightening. Brent's prompt spread (the difference between the two most recent contracts) was 67 cents per barrel with backwardation, a positive pattern. That's about double the difference from a month ago.

In related markets, refined products are performing well. Benchmark futures prices for diesel and gasoline both rose to their highest levels since October, posting double-digit increases so far in 2024. In contrast, oil prices have risen about 7% this year.

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