U.S. crude stockpiles fall less than expected

U.S. crude stockpiles fall less than expected

U.S. crude stockpiles fall less than expected

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for September delivery traded down about 2% at around $68.00 a barrel and dropped further to around $67.57 (down about 2.3%) shortly after the report's release.

"There is room for [prices in] the crude market to soften a bit more", says John Woods of JJ Woods Associates, adding that inventories could rise further as refineries head toward maintenance season after the summer driving season. A second tranche coming into effect on November 5 will cover Iran's oil sector.

Crude oil continues to rise bullish as traders remained anxious over revived US sanctions against major crude exporter Iran. Tuesday's sanctions primarily hit Iran's ability to function in global financial markets.

Many energy analysts believe new sanctions will remove far less of Iran's barrels than the last time when about half its oil exports were erased from the market as a result of USA and European sanctions.

Including these cargoes, the company's U.S. crude purchase amount to 16 million barrels in total since April. The average North Sea Brent mix at the Intercontinental Exchange (ICE) in London reached US$74.95 per barrel, down by US$0.99 only compared with previous month's trading.

Many European countries, China and India, oppose the sanctions, but the US government said it wants as many countries as possible to stop buying Iranian oil.

"The market is supported by concerns the sanctions on Iran are going to reduce Iranian supply", said Tony Nunan, oil risk manager at Mitsubishi in Tokyo.

This increase in gas usage will also mean that China's domestic gas output, though it will be the world's fourth largest gas producer by 2023, will be unable to keep up, with China increasingly becoming more reliant on gas imports from both established LNG producers like Australia, the U.S.

Gasoline exports edged up 75,000 b/d to 588,000 b/d, while distillate exports slipped 51,000 b/d to 1.23 million b/d. WTI Midland and WTI Cushing usually trade close to par, but there were several times over the past two years the spread has blown out, sometimes to up to 20 dollars a barrel.

Crude has struggled to gain near $70 this month after retreating from the highs of June as the USA and China showed no sign of backing down from the trade fight, raising concerns over global economic growth. In June, Saudi Arabia agreed to increase oil supply by a "measurable" amount.

Other than the four key importers, the European Union has said it will not enforce USA sanctions which are to be imposed on Iran's oil and banking sectors on November 4.

Traders were also scrutinizing weekly data on USA crude stockpiles, which showed inventories fell by 1.4 million barrels in the week through August 3. The Nasdaq composite rose 4.66 points, or 0.1 percent, to 7,888.33.

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