Oil prices inched up slightly during early Asian trading on Thursday as investors weighed the positive U.S. inventory data released on Wednesday and the likelihood of an extension of OPEC+ output cuts against the downside of Fitch’s downgrade of the U.S. government’s top credit rating.
Brent crude futures saw a rise of 27 cents, equivalent to 0.32 percent, reaching $83.47 per barrel by 0001 GMT. Meanwhile, U.S. West Texas Intermediate crude gained 29 cents, or 0.36 percent, to trade at $79.78 per barrel.
Both benchmarks had been trading near their highest levels since April the day before, but they closed down 2 percent due to the lower risk desire of investors following the U.S. ratings downgrade.
The downgrade came from Fitch, the ratings agency, which downgraded the U.S.’s long-term foreign currency ratings from AAA to AA+. The decision revealed weaknesses in the fiscal structure over the next three years, along with concerns about the high and growing general government debt burden, political polarisation, and the international status of the U.S. dollar.
As uncertainty gained ground in the financial markets, Wall Street’s three main indexes closed lower, and Treasury yields rose on Wednesday.
Despite the broader downward sentiment, oil prices are still finding support from a tightening supply backdrop.
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Last week, U.S. crude stocks fell by a record 17 million barrels as refiners increased runs and exports surpassed 5 million barrels per day (bpd), according to the Energy Information Administration’s report on Wednesday.
The inventory drawdown significantly exceeded Reuters analysts’ expectations of 1.4 million barrels, pointing to global demand outpacing supply as major producers continue with deep production cuts.
Looking ahead, the next market monitoring committee meeting of OPEC+ is scheduled for August 4.
Despite the market uncertainties, Reuters’ reporting suggests that OPEC+ is unlikely to make significant changes to its current oil output policy.
Saudi Arabia is expected to extend its voluntary 1 million bpd cut for another month, covering September.
Furthermore, Russia has previously announced plans to lower exports by 500,000 bpd in August, and recent data showing lower shipments from western Russian ports in the first week of August indicate that Moscow is following through on its supply cut commitments.
