Oil pares losses as Russian crude growth counters China stimulus

Oil pared earlier gains as traders weighed additional Russian supplies against further Chinese economic stimulus, with thin summer volumes exacerbating swings.

West Texas Intermediate traded near US$80 a barrel. Russia’s seaborne crude flows soared to an eight-week high, countering a move by China’s largest banks to cut interest rates. Still, physical markets show signs of tightness. WTI’s prompt-spread is trading 43 cents in backwardation. Stockpiles at the key storage hub of Cushing, Oklahoma, have declined to the lowest level since January. And refined products are also trading at giant premiums to crude as the U.S. tropical storm season picks up.

Oil futures have retreated from multi-month highs, weighed down by the prospect of expanding crude supplies. In the U.S., there are expectations that the Federal Reserve isn’t yet done with its campaign of monetary tightening to quell too-hot inflation. Meanwhile, China’s biggest refiner, Sinopec, said that the nation’s product demand in the second half would expand at a slower pace than in the first.

“The oil market remains rangebound with underlying support stemming from continued tightness across fuel products,” said Ole Hansen, head of commodities strategy at Saxo Bank. “A strong Asian session is supporting sentiment today, but overall the market is in no hurry to go anywhere in the short term.”