Singapore: Oil rose on Friday (27 July), holding firm above $75 a barrel as traders bet that fears of tight summer supplies would offset a fresh wave of risk aversion that struck US equities and dragged oil down a day ago.
London Brent crude gained 41 cents to $75.59 a barrel by 0340 GMT, after ending $1.14 lower on Thursday (26 July). US crude rose 43 cents to $75.38, after a loss of 93 cents the previous day, when it rallied more than $1 midsession to trade at a premium to Brent.
Traders saw an opportunity to buy after Thursday’s dip, felt across commodity markets, which came as weak US housing data revived worries about the economy of the world’s biggest oil consumer and sparked a flight from risky assets.
“The upward movement again shows the market is tight on supply because of the peak demand period,” said Gerard Burg, an oil and gas analyst from National Australia Bank.
Oil’s pick up came despite a fall in Asian shares on Friday, which tracked losses on Wall Street where the blue-chip Dow Jones industrial index fell 2.3 percent in its worst drop since the last global sell-off in late February.
Despite concerns of the potential for weaker U.S. demand, government inventory data on Wednesday showed a third-straight draw in U.S. crude stocks, including a 1.4 million-barrel fall at the Cushing, Oklahoma, delivery point for U.S. oil futures.
The drop for the ninth-straight week at Cushing helped boost US crude prices rally to a premium over Brent on Thursday for the first time since February, before the market pull-back.
Sentiment over global tight supply prevailed as OPEC’s oil output curbs could ensure a continuing decline in US crude stocks through the third quarter, analysts said.
Exports from OPEC-producer Nigeria, which has been plagued by militant attacks on oil infrastructure, are expected to fall 110,000 barrels per day (bpd) to around 2 million bpd in September, traders said.
Traders were also eyeing the continued shutdown of Exxon Mobil Corp.’s 326,000-bpd Fawley refinery, which accounts for almost a fifth of Britain’s refining capacity, though the major said on Thursday it planned to restart operations over the next several days.
While bullish for gasoline and heating oil, the closure could be bearish for North Sea crude if the plant stops processing for a prolonged period.