Oil holds gain as traders turn focus to decline in inventories

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Oil steadied as traders assessed the impact of the latest round of supply cuts from OPEC+ and a US industry report that pointed to another drawdown in nationwide commercial inventories.

West Texas Intermediate traded just below $72 a barrel, after rising by almost 3 per cent over the previous two sessions following announcements from Saudi Arabia and Russia that they would cut production in a bid to stem a slide in prices.

The American Petroleum Institute estimated that nationwide US crude inventories declined by 4.4 million barrels last week, according to people familiar with the data.

Official figures will follow later on Thursday, with stockpiles last reported at the lowest level in almost six months.

Crude remains about 10 per cent lower this year, with China’s lackluster economic recovery and tighter monetary policy in the US and Europe weighing on the outlook for demand. The surge in borrowing costs is leading to lower global oil inventories, possibly setting prices up for spikes further down the line.

A large majority of US Federal Reserve officials agreed that more tightening will likely be needed this year, the minutes from the Fed’s latest meeting showed.

Data due later this week — including jobless claims and payrolls data — will give further clues on the path of monetary policy.

“Demand concerns were eased” with US stockpiles likely shrinking, said Charu Chanana, market strategist at Saxo Capital Markets in Singapore. “Focus will turn to the labour market indicators in the rest of the week,” she said, referring to US economic data.

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