By Saket Sundria and Grant Smith
West Texas Intermediate futures added 1% on Thursday as the dollar weakened before a meeting of the European Central Bank, boosting the appeal of commodities priced in the U.S. currency. A sixth weekly-decline in U.S. crude stockpiles also supported prices, the longest run of draws since early 2018.
Crude has fallen around 15% from late April despite an agreement by the OPEC cartel and its allies to keep supplies restrained, and growing political tensions in the Persian Gulf as the U.S. pressures Iran with sanctions. Worries over the economy persisted after a gauge of American factory activity fell to the lowest in almost a decade and a German manufacturing index slumped to a seven-year low, putting Europe’s largest economy at risk of recession.
“Dips are met with buying interest as global oil inventories are set to decline in coming months and the stand-off between Iran and the West provides a somewhat bullish backdrop,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.
WTI for September delivery added 58 cents, or 1%, to $56.46 a barrel on the New York Mercantile Exchange as of 12:29 a.m. in London. The contract has fallen 3.6% in July, and is on track for only its second monthly loss this year.
Brent for September settlement rose 68 cents to $63.86 on the ICE Futures Europe Exchange after closing down 1% on Wednesday. The global crude benchmark is trading at a $7.42 premium to WTI.
The IHS Markit Manufacturing PMI for the U.S. fell to 50 in July from 50.6 in June, trailing all estimates in a Bloomberg survey, adding to evidence the American industrial sector is losing momentum. In Germany, a factory PMI dropped to 43.1 from 45.
See also: EIA Crude Draw Reflects Storm Effect; Demand Growth Falters: Lee
U.S. crude inventories fell by 10.8 million barrels in the week through July 19 to the lowest since late March, the EIA reported, even as refinery runs dropped to a seven-week low. The impact on prices of falling stockpiles may have been offset by Iran saying it will make “utmost efforts” to allow the safe passage of tankers in the Persian Gulf.
“The geopolitical noise has lost its influence and instead the manufacturing slowdown” and softening demand are in focus, said Norbert Ruecker, head of economics at Julius Baer Group Ltd. in Zurich.
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