Crude futures extended overnight gains in Asia trade Wednesday, riding on the optimism that U.S. crude inventories likely shrank again last week.
Oil prices rose 1.4% in the U.S. session Tuesday, after industry group American Petroleum Institute's data showed an 8.1 million barrel contraction in U.S. crude supplies last week. If confirmed by the Energy Information Administration later in the global day, it would show strong U.S. gasoline demand thanks to the annual summer driving season.
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The price gains come even as U.S. oil production has continued to increase. Unless there was a persistent downtrend in oil rig count and production, it would be premature to say that U.S. producers have felt the heat from the earlier oil price weakness, said Goldman Sachs.
"We believe the coming month will be key to testing whether producers are responding to the signal of $45/bbl WTI prices," the bank said, adding the upcoming earnings seasons will also be an important indicator of American producers' resilience.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $45.79 a barrel at 0356 GMT, up $0.75 in the Globex electronic session. September Brent crude on London's ICE Futures exchange rose $0.70 to $48.22 a barrel.
Investors will be watching for changes in global crude inventories levels and production, two data points that will be featured in the Organization of the Petroleum Exporting Countries' monthly report due later Wednesday.
Some preliminary reports show OPEC production inching higher in June, mostly led by Nigeria and Libya, the two member nations exempt from the OPEC production cut deal. Estimates by S&P Global Platts put OPEC's June production up slightly from May at 32.49 million barrels.
Production by the two African nations have surged in the past three months, raising concerns from other OPEC members. Representatives from Nigeria and Libya have been invited to an OPEC meeting in Moscow later July to discuss whether to include the countries in the curtailment plan, cartel delegates say.
Still, decreased supply on its own won't likely correct the oil market imbalance as demand remains weak. "The only salvation to the current oil market is demand, which is still trailing behind supply growth," said Li Li, head of research at ICIS China.
In China, though refined oil demand is expanding, it is still unable to outpace supply, said Ms. Li. Chinese government data show production of oil products rising to 28.20 million tons in May, while consumption was at 26.46 million tons.
Refined products were also broadly higher on Wednesday. Nymex reformulated gasoline blendstock was 1.9% higher at $1.53 a gallon, while July diesel gained 0.9% at $1.49. July ICE gasoil was last rose 1.8% at $441.25a metric ton.
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(END) Dow Jones Newswires
July 12, 2017 00:53 ET (04:53 GMT)