Crude oil futures moved higher during mid-morning trade in Asia Tuesday on expectations of a decline in US crude inventories for the week ended April 20.

At 10:15 am Singapore time (0215 GMT), ICE June Brent crude futures were up 19 cents/b (0.25%) from Monday’s settle at $74.90/b, while the NYMEX June light sweet crude contract was up 24 cents/b (0.35%) at $68.88/b.

On the Shanghai International Energy Exchange, the most active September crude futures contract was up $1.61/b (2.33%) from Monday’s settle at Yuan 446.50/b ($70.71/b). Price quotes on the INE website are delayed by 30 minutes.

“Over and above the backdrop of Middle East tensions, expectations for a decline in the upcoming US inventories report had been one fueling the rise [in crude prices],” IG market strategist Pan Jingyi said.

Analysts surveyed Monday by S&P Global Platts expect a fall of 1.1 million barrels in US crude oil stocks for the week ended April 20. For the same week in the 2013-17 period, inventories had risen 930,000 barrels on average.

Crude stocks typically fall from May until the end of August. However if stocks had fallen last week, that would mark the second straight draw, suggesting this period of seasonal declines could be underway.

One of the strong reasons for US crude inventories to have posted declines in the past weeks have been increasing refinery utilization rates and a rise in exports from the US, analysts said.

Strong refinery activity will help pull barrels from storage. After six straight weekly increases, the utilization rate decreased 1.1 percentage points to 92.4% of capacity in the week that ended April 13.

Analysts are looking for a further decline last week of 0.2 percentage point to 92.2%.

However, despite falling inventories expected in the US, oil futures have yet to show any signs of traders unwinding positions betting on strength in ICE Brent relative to NYMEX crude, analysts said.

Front-month ICE Brent/NYMEX crude spread stood at $6.07/b at Monday settlement, the highest since January 2018. The spread was at $6.02/b as of 0215 GMT Tuesday.

Preliminary data on US crude and product stock levels are due for release from the American Petroleum Institute later Tuesday while the more definitive numbers from the US Energy Information Administration will be released Wednesday.

Meanwhile, prices also found some support from a rift between Iran and Saudi Arabia over the kingdom’s desire to extend the OPEC-led supply cut agreement beyond 2018.

“If the current oil price hike trend continues, there will be no necessity for extension of the OPEC agreement,” Iranian oil minister Bijan Zanganeh said.

“High oil price, even in the mid term, works against OPEC interest by imposing volatility on the market and pressure on the price.”

Brent crude has rallied almost 40% since January amid growing geopolitical tensions in the Middle East and traded as high as $75.10/b during the intraday trade session on Monday.

“Long-term oil is beyond the demand curve. Strong growth will keep the long-term trend higher as the oil super cycle continues,” Price Futures Group energy analyst Phil Flynn said in a note.

As of 0215 GMT, the US Dollar Index was up 0.04% at 90.71.

–Avantika Ramesh, avantika.ramesh@spglobal.com

–Edited by Irene Tang, irene.tang@spglobal.com


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