Oil Ticks Higher as Traders Digest Mixed US Inventory Snapshot

(Bloomberg) -- Oil edged higher after a mixed snapshot of US inventories that included an unexpected drop in nationwide crude holdings.

Brent crude rose toward $84 a barrel after climbing by 0.5% in the previous session, with West Texas Intermediate above $79. Overall stockpiles of crude declined by 1.36 million barrels last week, although inventories expanded at the Cushing storage hub to hit the highest level since last July.

Oil has been on the decline since early last month as tensions in the Middle East eased. Softer timespreads, poorer refining margins, and options skews remaining in a bias toward puts collectively suggest a weaker global market. In addition, OPEC+ supply is in focus, with Russia pumping above its target before the cartel meets next month to decide whether to extend curbs.

Goldman Sachs Group Inc. no longer expects the group to announce a partial unwind of its voluntary production cuts in June, analysts including Daan Struyven said in a note. “We expect lower OPEC+ supply for longer,” they said. Still, higher production targets remain “plausible” as growing spare capacity could increase the pressure to raise output.

Separately, the Biden administration raised the price it’s willing to pay to refill the country’s emergency oil reserves. The Energy Department will pay as much as $79.99 a barrel, the first time an explicit ceiling has been set.

“After being on the back foot over the past two weeks, oil prices are attempting to stabilize,” said Yeap Jun Rong, market strategist at IG Asia Pte. “A gridlocked situation in the Middle East between Israel and Hamas, and a drawdown in US crude inventories, are offering reasons for bearish sentiment to unwind a little.”

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