Crude Oil Futures Eased

Crude oil futures were lower in mid-morning Asian trade on July 8 as investors booked profits following a 4% overnight surge. US inventory statistics released overnight revealed a mixed bag, with a big rise in crude supplies in the week ending July 1 offset by reductions in refined product stocks.

The ICE September Brent futures contract was down 36 cents/b (0.34 per cent) at $104.29/b from the previous level. Meanwhile, the NYMEX August light sweet crude contract was down 47 cents/b (0.46 per cent) at $102.26/b.

US crude stockpiles increased by a staggering 8.23 million barrels in the week ending July 1 to 423.8 million barrels, according to statistics from the US Energy Information Administration on July 7, owing to weaker refinery demand and higher imports.

Warren Patterson, ING’s Head of Commodities Strategy, stated that after accounting for changes in the US strategic petroleum reserve, overall US crude oil stockpiles declined by a significantly smaller 2.39 million barrels. The EIA said that nationwide gasoline stockpiles declined 2.5 million barrels to 219.11 million barrels during the same time, while distillate stocks fell 1.27 million barrels to 111.14 million barrels.

Product demand had increased during the week. Product provided for gasoline, the EIA’s proxy for demand, increased to a year-to-date high of 9.41 million b/d. Meanwhile, the product supplied for distillates increased by 810,000 b/d to 4.38 million b/d, a 15-week high and more than 16% more than the five-year average.

India Isn’t Likely to Stop Buying Russian Oil

Despite Western criticism, India is sticking to its pledge to purchase Russian oil.

As Brent crude returns to near $100 per barrel, foreign policy experts predict that India’s desire to acquire oil will only grow as inflation concerns take centre stage.

India is vulnerable to rising oil costs because it is the world’s third-largest oil importer. Furthermore, Prime Minister Narendra Modi is under increasing pressure to rein down excessive inflation for his 1.3 billion inhabitants.

Since Russia invaded Ukraine in late February, India’s purchases of Russian oil have increased dramatically. According to Again Capital, early June data show India’s supply of Russian oil hit around 1 million barrels per day. It went up from 800,000 barrels per day in May. Because of the restrictions imposed on Iran, Russian oil now accounts for 25% of India’s energy imports. Nonetheless, many criticize India for funding Russia’s military operations in Ukraine.

Americans who are angry with rising prices should consider this: “Oil prices would likely be $8 to $10 higher if India did not buy the volumes of Russian crude that it does,” said John Kilduff, founding partner of Again Capital. Experts say recession concerns may lower the quantity of oil India purchases, but they aren’t changing their forecasts at this time.

Last week, G7 leaders discussed imposing a price restriction on Russian oil. However, strategists such as RBC Capital’s Helima Croft believe this could backfire, especially now that oil prices are trading off their highs.

Oil Rose in Volatile Trade

Oil gained in choppy trade on Friday, but it was still on track for a weekly fall as fears of a recession-driven demand downturn offset tight global supplies.

Central banks are hiking interest rates to combat inflation, creating concerns that rising borrowing costs would hamper the economy. Meanwhile, widespread COVID-19 testing in Shanghai this week fueled fears of possible lockdowns, which might reduce oil consumption.

Brent crude had risen 35 cents, or 0.3 per cent, to $105.00 per barrel. Meanwhile, West Texas Intermediate crude had risen 19 cents, or 0.2 per cent, to $102.92.

On Friday, the latest U.S. jobs report is likely to indicate that nonfarm payrolls climbed by 268,000 in June.

However, oil prices have risen dramatically in the first half of the year. After Russia launched its invasion of Ukraine in February, Brent crude approached a record high of $147. This added to supply problems that some experts believe to grow.

Western prohibitions on Russian oil exports have kept prices stable. However, they prompted a re-routing of supplies, even as OPEC and its partners struggle to meet agreed output increases.