Crude oil futures were marginally higher during mid-morning trade in Asia Tuesday ahead of the release of the US’ inventory report for last week amid mixed analysts’ expectations. Sweet crude contract was 18 cents/b (0.37%) higher at $48.70/b. According to analysts surveyed Monday by S&P Global Platts, US crude inventories for the week ended December 4 fell 5.95 million barrels. US product inventories on the other hand were expected to have increased, with gasoline inventories expected to rise by 4.2 million barrels, while distillate inventories likely rose 4.3 million barrels last week.
The predictions of strong builds in product stocks come amid an expected 0.2 percentage point increase in nationwide refinery utilization to 97.4% of total capacity, analysts said. Preliminary data on last week’s US crude inventory is due for release from the American Petroleum Institute later Tuesday, while the more definitive numbers are due for release from the US Energy Information Administration later Wednesday.
Meanwhile, investors are also closely watching for news out of the two-day US-China trade talks, which resumed Monday in Beijing. “A risk on tone in markets instigated by the resumption in trade talks between the US and China helped extend gains in commodity markets that had emerged late last week,” ANZ analysts said in a note Tuesday. “Against the backdrop of negotiations held in Beijing, the optimism from US commerce secretary Wilbur Ross who sees ‘a very good chance’ for a ‘reasonable settlement’ with China has kept the sun shining over equities on Wall Street, ” IG’s market strategist Pan Jingyi said.
The market remained focused on the OPEC production cuts, which came to effect January 1, with participants expecting a further reduction in OPEC and non-OPEC production levels. “If compliance by OPEC and the allied non-OPEC countries is similarly high as in the agreement two years ago, the oil market is likely to be rebalanced during the first half year. Less sharply rising US oil production may also play its part, ” Commerzbank analysts said in a note.