NYMEX crude up in early Asia as API reports sharp weekly drop

Investing.com – Crude oil prices rose slightly in early Asia on Wednesday as a U.S. industry survey showed smart drops in crude and gasoline stocks last week.

On the New York Mercantile Exchange, WTI crude for September delivery rose 0.05% to $45.88 a barrel.

The American Petroleum Institute said that crude stocks plunged 2.4 million barrels last week, while gasoline supplies dropped 1 million barrels and distillates rose 1.7 million barrels.

Energy traders are anticipating a draw in U.S. weekly stockpiles as well with the U.S. government report on Wednesday that could show that stockpiles fell by 1.3 million for the week that ended on July 31.

Last week, U.S. crude futures surged by more than 1.5% after the Energy Information Administration (EIA) said crude stockpiles nationwide fell by 4.203 million barrels, below expectations for a 1.88 million draw. U.S. crude inventories remain near 460 million barrels, around its highest level in at least 80 years.

Any supply draws are viewed as bullish for crude, amid a glut of oversupply in energy markets worldwide.

Overnight, crude futures rebounded slightly from Monday's massive rout that sent prices crashing to six-month lows, as investors await the release of the American Petroleum Institute's weekly inventory report for further signals on the widening supply and demand gulf in global energy markets.

On the Intercontinental Exchange (ICE), North Sea also rallied from Monday's poor session. Brent crude for September delivery wavered between $49.54 and $50.45 a barrel before closing at $50.00 a barrel, up 0.48 or 0.97%. The spread between the international and U.S. benchmarks stood at $4.25, slightly below Monday's level of $4.30 at the close.

For the month of July, OPEC supply surged to 32.01 million barrels per day, according to a Reuters survey, rising slightly from an upwardly revised total of 31.87 million bpd in June. Since roiling global energy markets in November with a strategic decision to boost its market share by leaving its production ceiling above 30 million bpd, OPEC supply has increased by more than 1.6 million bpd.

The decision by the world's largest oil cartel triggered a protracted battle with the U.S. for global market share, causing futures' prices to plunge by roughly 50% from its level near Thanksgiving. The EIA said last week that U.S. output remains around 9.5 million barrels per day – a level that continues to hover around 40-year highs. A dip in prices, however, could force U.S. shale producers to cut output due to its high drilling costs.

Elsewhere, the White House received a ringing endorsement on Tuesday when U.S. Senator Tim Kaine (D, Virginia) said he would support the nuclear agreement with Iran. Congress has until September 17 to review the comprehensive deal struck between Iran and a group of six Western powers last month, after a series of delays. The Persian Gulf state is reportedly hoarding up to 30 million barrels of crude in reserve ready for export in the months after a deal is finalized.

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