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Oil jumps back above $73 as report points to falling stockpiles

© Shutterstock / Oil and Gas PhotoA technician checking equipment on an offshore oil and gas platform.
A technician checking equipment on an offshore oil and gas platform.

Oil climbed back above $73 a barrel after an industry report pointed to a big decline in US crude inventories ahead of an OPEC+ meeting that’s expected to lead to the group returning more supply to the market.

Futures in New York rose 0.7% in early Asian trading, and are set for a third monthly gain. The American Petroleum Institute reported stockpiles fell by 8.15 million barrels last week, according to people familiar with the data. OPEC+ delayed preliminary talks on the oil market to allow members more time to resolve differences before its main meeting Thursday, as the spread of the more infectious delta variant of Covid-19 raised demand concerns.

Oil set for third monthly gain on improving demand

The recovery in key energy consumers including the US and China has helped underpin a surge in fuel demand and headline oil prices this year. OPEC+ predicts the market will remain in deficit for the rest of 2021 if it keeps output steady, while the prospect of an imminent flood of Iranian crude is fading as talks between Tehran and world powers to revive a nuclear deal drag on.

The latest virus flare-up is causing some concerns, however. Cases have spiked in the UK and authorities in Australia are racing to contain outbreaks. Other nations are renewing travel restrictions.

Prices

West Texas Intermediate for August delivery climbed 0.7% to $73.51 a barrel on the New York Mercantile Exchange at 8:17 a.m. in Singapore after gaining 0.1% on Tuesday.

Front-month futures are up about 11% this month.

Brent for August settlement expires on Wednesday and was untraded after adding 0.1% to close at $74.76 on Tuesday.

The more-active September contract rose 0.6%.

The decline in US crude stockpiles reported by the API would be the largest since January if confirmed by Energy Information Administration data later on Wednesday. The median estimate in a Bloomberg survey is for a drop of 3.85 million barrels. The API reported that gasoline inventories rose by 2.42 million barrels, however.

OPEC+ had been due to convene its advisory body — the Joint Ministerial Monitoring Committee — on Wednesday, but that session will now take place on Thursday. Delegates said it was to allow more time for talks. According to an official letter, Russia’s Alexander Novak sought the delay because of “presidential commitments.”

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