Oil rises above $60 as US inventories register larger-than-expected decline
Market fundamentals, however, remain weak with low refining activity and sluggish global crude demand
Oil surged back above $60 per barrel after a sizeable drop in US crude inventory levels, as well as general optimism over a possible easing of trade tensions between Washington and Beijing.
Brent for October settlement gained 1.5 per cent over its previous close, trading at $60.98 per barrel at 3.11pm UAE time.
US inventory declined by 3.5 million barrels for the week ending August 16, according to data from the American Petroleum Institute, exceeding expectations by Reuters for a decline of 1.9 million bpd.
Brent has recovered ground, having dramatically lost 7 per cent of its value in the aftermath of US President Donald Trump's decision to impose 10 per cent tax on $300 billion (Dh1.1 trillion) worth of Chinese goods. Global stocks and some other commodities also took a hit, but recovered following Mr Trump's decision to postpone implementation to December from September, as well as indications from the White House that talks with China were ongoing.
Prices started on a positive note earlier this week when a Saudi gas facility associated with a large oil field in the country's south came under attack from armed drones.
However, analysts have cautioned that market fundamentals remain weak, with refining activity and demand growth remaining lacklustre.
Crude processing has witnessed a second consecutive year-on-year decline in the first half of 2019.
Global demand growth for crude year-to-date slowed 0.7 per cent or 730,000 bpd, with May and June remaining flat, adding to further downside pressures on prices.
"Available product inventory data hints at these two months of weak refining activity having shown a flat development, pointing at weak demand growth for refined fuels," consultancy Energy Aspects said in a note.
China's slowing demand for road transport fuels was also a worrying trend, Energy Aspects said, as the country remains the biggest driver for global demand growth.
"While crude demand in the country has continued to rise on the back of capacity additions, the country has increasingly reduced product net imports over 2019," the report added.
Updated: August 21, 2019 06:13 PM