Weaker dollar, US crude draw push oil higher despite economic headwinds
6th August 2020 19:00 GMT

Oil futures settled higher Aug. 5 as a weakened US dollar and large US crude draw offset weak US employment data.

NYMEX September WTI settled up 49 cents at $42.19/b and ICE November Brent was up 74 cents on the day at $45.17/b.

US commercial crude stocks declined 7.37 million barrels to 518.6 million barrels during the week ended July 31, US Energy Information Administration data releases Aug. 5 showed, leaving them 15.9% above the five-year average for this time of year.

Back-to-back weekly draws have seen US crude supply shrink by 18 million barrels, narrowing the surplus to the five-year average from 19% during the week ended July 17.

"The crude supply fundamentals seem fairly in check, so oil prices will likely continue to follow the move in stocks," OANDA senior market analyst Edward Moya said. "WTI crude is starting to break away from its tight trading range, but that will not continue if the US economic recover falters and the job creation flatlines."

NYMEX September ULSD settled up 47 points at $1.2631/gal and September RBOB climbed 85 points on the day to settle at $1.2228/gal.

US gasoline inventories climbed 420,000 barrels last week to 247.81 million barrels, EIA data showed, putting them 7.3% above the five-year average, while distillate stocks surged 1.59 million barrels to a fresh multidecade high 179.98 million barrels.

The builds come amid a broad weakening of US refined product demand. Total product supplied, a proxy for demand, for all refined products plunged 1.18 million b/d to 17.91 million b/d last week, giving back almost all the gains seen during the week prior. Gasoline demand was down around 190,000 b/d on the week at 8.62 million b/d, leaving it nearly 11% behind year-ago levels.

Oil futures had been trending higher overnight, amid expectations of a large US crude draw, but a weak US jobs report halted the rally.

US private sector payrolls increased by just 167,000 in July, down sharply from an increase of 4.3 million jobs in June, Automatic Data Processing data showed Aug. 5. The data shows that the pace of the labor market recovery slowed in July, said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. The report could portend a weaker-than-expected US nonfarm payrolls report slated for release on Friday.

But a continued slide in the US dollar helped to backstop prices. Front-month ICE US dollar index futures plunged below 93, on pace for its lowest close since May 2018. The strength of the US dollar and that of dollar-denominated commodities, including oil, are typically inversely correlated.

Bunkerworld .,
6th August 2020 19:00 GMT

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