Oil prices steady as rising US stockpiles offset tightening market

Oil prices were stable after yesterday's decline following an industry report that US crude inventories increased slightly, ahead of the release of official data. Brent crude remained at more than $85 per barrel while West Texas Intermediate (WTI) was near $81 per barrel. A report by the American Petroleum Institute (API) showed crude stockpiles climbed about 900,000 barrels last week, and holdings in the Cushing storage hub fell.

The Energy Information Administration will release its official weekly data on inventories, refining activity, and fuel demand later on Wednesday. This official data will give a better picture of the oil market.

Oil is still assured of notching a monthly gain despite the current volatile trading. Several economists have grown positive about the outlook for the market in the next quarter, saying supply conditions are getting tighter. Geopolitical tensions, originating from Yemen and Russia, further may contribute to the risk of higher prices.

Yeap Jun Rong, market strategist at IG Asia Pte in Singapore, commented on the market dynamics: "Tightening fundamentals through the third quarter of the year leave us supportive toward the market." He added that short-term caution will prevail before the release of inflation data later this week, which can further set directions on interest rates.

The market structure has also shown tendencies of bullishness. Prompt time spreads for Brent and WTI have both widened, a backwardation pattern. This market structure, where near-term prices stand higher than future prices-is indicative of robust current demand relative to future supply. Moreover, money managers added positions on a host of products, including ICE gasoil, Europe's diesel benchmark.

The oil market is again threading its way through a complex tapestry as traders digest the EIA's report and other major economic indicators. The relationship between rising stockpiles, refining activities on the rise, and geopolitical developments will define the fate of the market over the coming weeks.