Oil rises as US inventories set for decline

Crude oil benchmarks retreated on Monday due to persisting uncertainty over Opec+ action

A worker walks atop oil tanker wagons at an oil terminal near Kolkata, India. The stalemate within the world's main oil-exporting bloc has left traders uncertain about future supply. Reuters

Oil rose during the second trading session on Tuesday, strengthened by an expected fall in US inventories.

Crude oil benchmarks, which retreated on Monday due to persisting uncertainty over Opec+ action, gained as the market continued to tighten.

Brent, the main benchmark for oil, rose 0.51 per cent to $75.54 per barrel at 2.44pm UAE time. West Texas Intermediate, which tracks US grades, rose 0.39 per cent to $74.39 per barrel.

US crude stocks are expected to decline for the eighth consecutive week, according to a Reuters poll. They hit their lowest level since February 2020 in the week that ended on July 2.

"In the bigger picture, Brent crude's key longer-term levels remain [between] $73 and $78 a barrel while WTI's are $71 and $77 a barrel," said Jeffrey Halley, a senior market analyst for the Asia-Pacific region at Oanda.

Although US consumer price index data "will be of passing interest to oil markets this evening", investors are really waiting on the outcome of the UAE's request to review the baseline used to determine its quota, he said.

The UAE has insisted on updating the baselines to reflect production capacities reached in April 2020, rather than the levels of October 2018.

The stalemate within the world's main oil-exporting bloc has left traders uncertain about future supply. The group abandoned a meeting at the beginning of the month and postponed the planned gradual addition of 2 million barrels per day back to the market.

This leaves the oil markets particularly tight as the producers have yet to indicate when they expect to reconvene.

"Major oil producers in the Middle East have been raising their official selling prices for August in a clear sign to the market to prepare for the oil market to remain tight," Emirates NBD said in a note on Tuesday.

Oil demand remains tenuous as Covid-19 cases continue to climb. The overall death toll from the pandemic topped 4 million last week.

Major crude demand centres such as the US, India and Brazil continue to lead the number of infections.

The Delta-plus variant remains a cause of concern as cases in Europe increase at a time when countries are looking to ease restrictions.