Oil prices on world markets continue to fall

Oil Prices Up 5%, Highest in 7 Weeks, Despite Minor Drop

Quick Look:

  • Consecutive Weekly Gains: Oil prices are set for a second week of gains due to rising demand and declining US inventories.
  • Brent futures at $85.53 per barrel and WTI at $81.15 per barrel, with a broader % monthly increase of 5%.
  • Increased seasonal demand and geopolitical tensions, including Israel-Hezbollah and the hurricane season, are driving prices.

Oil prices are poised to finish their second consecutive week with gains. The improving demand and diminishing inventories in the United States drive the trajectory. This trend signals a recovery in the oil market, bolstered by various contributing factors and global events. Brent futures for August are currently priced at $85.53 per barrel, marking a slight decrease of $0.18. However, the previous session had seen a gain of 0.8%. Similarly, August’s US West Texas Intermediate (WTI) stands at $81.15 per barrel, down by $0.14. The expired July contract for WTI ended at $82.17 per barrel, showing a 0.7% increase. These movements reflect a broader % monthly increase of 5%, bringing prices to their highest levels in over seven weeks.

EIA: US Crude Oil Stocks Down 2.5M Barrels to 457.1M

The Energy Information Administration (EIA) data points to a significant uptick in seasonal demand. Ongoing tensions between Israel and Hezbollah are likely to maintain oil’s upward momentum throughout the summer. Especially in addition to the onset of the hurricane season. The latest EIA report, dated June 20, 2024, reveals that the total product supplied reached 21.1 million barrels per day (bpd), an increase of 1.9 million bpd for the week ending June 14. There was a notable drawdown in crude stockpiles by 2.5 million barrels, bringing the total to 457.1 million barrels, which exceeded the expected draw of 2.2 million barrels. Gasoline inventories also fell by 2.3 million barrels to 231.2 million barrels, contrary to the anticipated build of 600,000 barrels.

Asian Refineries Boost Oil Output; Japan’s CPI Up 2.5%

Across Asia, oil refineries are restarting previously idle capacities following maintenance, indicating a robust recovery in the region’s demand for oil. This renewed demand from Asia is a positive sign for the global oil market. Additionally, consumer prices in Japan have risen by 2.5% year over year, suggesting a potential interest rate hike by the central bank to combat inflation. In the United States, a decline in new unemployment claims indicates that the Federal Reserve may opt to keep interest rates unchanged, reflecting stability in the job market.

Record 71M US Travelers Expected Over July 4, Up 4.8%

This stability is further underscored by the AAA’s forecast for the July 4 weekend travel, which expects a record 71 million travellers, marking a 4.8% increase over last year. This surge in travel plans suggests that high oil interest rates and inflation are not significantly deterring consumers. Analysts from ANZ Research highlight that signs of stronger demand in Asia have positively influenced market sentiment. Similarly, Citi analysts suggest that seasonal demand increases, geopolitical tensions, and the hurricane season are factors that could sustain the current price strength.

China’s Economic Slowdown Poses Risk to Oil Demand

However, downside risk remains due to slowing economic growth in China, which could temper global oil demand. In summary, oil prices are on track for a second week of gains driven by rising demand and falling inventories, with several global events and economic indicators suggesting continued strength in the market. Nonetheless, the potential slowdown in China’s growth remains a concern that could impact future demand.

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