Oil prices faced continued downward pressure yesterday, with ICE Brent settling 1.69% lower at just above US$81 per barrel, marking its weakest level since early June. Earlier this week, the market breached both the 50-day and 200-day moving averages, lacking substantial support since then. Lingering worries over weak Chinese demand further exacerbated concerns. Despite nearing oversold conditions, analysts maintain optimism that underlying fundamentals will bolster prices in the latter part of the third quarter, driven by a deficit environment.
Early trading today saw a more positive turn following API data revealing a larger-than-expected decline in US crude oil inventories, down by 3.86 million barrels over the past week compared to an anticipated draw of about 2.8 million barrels. Concurrent decreases were also observed in gasoline and distillate inventories, falling by 2.77 million barrels and 1.5 million barrels respectively. The upcoming EIA inventory report later today is anticipated to provide further market insights.
Meanwhile, supply disruptions from wildfires in Canada continue to escalate, prompting some producers to scale back operations. Approximately 388,000 barrels per day of oil production are situated within close proximity to wildfires spanning at least 10 hectares, according to Bloomberg reports. These fires have contributed to narrowing the WCS-WTI differential this month, currently reducing from approximately $16.40 per barrel to $14.70 per barrel.
In other commodity news, LME lead inventories surged by 44,475 tonnes to 253,550 tonnes, the highest recorded since May 7th, driven primarily by increases in Singaporean warehouses. Concurrently, lead cancelled warrants decreased by 750 tonnes to 58,200 tonnes, while on-warrant inventories climbed by 45,225 tonnes to 195,350 tonnes.
The latest data from the World Steel Association (WSA) indicates a slight 0.5% year-over-year increase in global steel production to 161.4 million tonnes in June. This growth was tempered by declines in production from Japan (-4.2% YoY) and South Korea (-7.2% YoY), despite a robust 5.1% YoY rise in output from the European Union. Cumulatively, global steel output remained stable at 954.6 million tonnes in the first half of the year. Chinese steel production edged up by 0.2% YoY to 91.6 million tonnes in June, while cumulative production for the first six months declined marginally by 1.1% YoY to 530.6 million tonnes.
Meanwhile, the latest Commitment of Traders Report (COTR) revealed a reduction in investor optimism across several base metals. Net long positions in copper decreased by 10,706 lots to 71,228 lots, marking the smallest net long position since February 23rd, amid concerns over softening Chinese demand and rising global inventories. Similarly, bullish positions in aluminium fell by 12,416 lots to 109,894 lots, while net long positions in zinc declined by 3,145 lots to 27,595 lots.
Related topics:
