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Oil up 3% on robust U.S. fuel consumption, tight supply outlook

Commodities Aug 18, 2022 03:06PM ET
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© Reuters. FILE PHOTO: An oil pump jack pumps oil in a field near Calgary, Alberta, Canada on July 21, 2014. REUTERS/Todd Korol
 
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By Scott DiSavino

NEW YORK (Reuters) -Oil prices gained about 3% on Thursday as positive U.S. economic data and robust U.S. fuel consumption offset concerns that slowing economic growth in other countries could undercut demand.

Brent futures rose $2.94, or 3.1%, to settle at $96.59 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $2.39, or 2.7%, to settle at $90.50.

Prices rose more than 1% during the previous session, although Brent at one point fell to its lowest since February, as signs of a slowdown mounted in some places.

"Oil prices rallied after another round of impressive U.S. economic data boosted optimism for an improving crude demand outlook," said Edward Moya, senior market analyst at data and analytics firm OANDA. Moya also noted that OPEC will not allow the recent pullback in oil prices to continue much further.

The number of Americans filing new claims for unemployment benefits fell last week and the prior period's data was revised sharply lower, suggesting labor market conditions remain tight despite slower momentum due to higher interest rates.

The new secretary general of the Organization of the Petroleum Exporting Countries (OPEC), Haitham Al Ghais, told Reuters that policymakers, lawmakers and insufficient oil and gas sector investments are to blame for high energy prices, not the cartel.

At its next meeting in September, Al Ghais said OPEC+, which includes other oil suppliers like Russia, "could cut production if necessary, we could add production if necessary. ... It all depends on how things unfold."

U.S. crude stocks fell by 7.1 million barrels in the week to Aug. 12, Energy Information Administration data showed, against expectations for a 275,000-barrel drop, as exports hit a record 5 million barrels per day (bpd).

Bans by the European Union on Russian oil exports could dramatically tighten supply and drive up prices in coming months.

"The EU embargoes will force Russia to shut in around 1.6 million (bpd) of output by year-end, rising to 2 million bpd in 2023," consultancy BCA research said in a note.

Russia, however, forecasts rising output and exports until the end of 2025, an economy ministry document seen by Reuters showed, saying revenue from energy exports will rise 38% this year, partly due to higher oil export volumes.

MORE CAUTIOUS

Oil prices rose despite the possibility of increased supplies from Iran and worries that demand could drop if China imposes more lockdowns to stop the spread of COVID, along with slowing economic growth as central banks raise interest rates to control runaway inflation.

The market is awaiting developments from talks to revive Iran's 2015 nuclear deal with world powers, which could lead to a roughly 1 million bpd boost in Iranian oil exports.

Open interest in U.S. futures fell on Wednesday to the lowest since January 2015 as investors cut back on risky assets like commodities, worried central banks will keep raising rates.

The U.S. dollar index, meanwhile, hit a near five-week high on Thursday.

A stronger dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.

Oil up 3% on robust U.S. fuel consumption, tight supply outlook
 

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Comments (7)
zaw lin
zaw lin Aug 18, 2022 2:52PM ET
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soe paing
Adamo Nals
Adamo Nals Aug 18, 2022 1:48PM ET
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John Spot on. $150 a barrel for WTI is incoming by the end of 2022. This gimmick is the only reason that Biden has done with the reserves why oil is down. A -7,000,000 barrel read today should say everything you need to know. We are so short supplied. Oil should already be well over $110 a barrel
John Catalano
John Catalano Aug 18, 2022 12:27PM ET
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Biden’s SPR release ends in October. The EU Russian sanctions take effect on Dec 5th. If China ends their ridiculous lockdowns $125 per barrel will look cheap in January.
Me comment
Me comment Aug 18, 2022 10:28AM ET
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overall crude stock inventory is up over 10 million barrels since April of this year, while gasoline inventories are up 15 million barrels despite the weekly ups and downs reported. Neither support the need for higher oil or gasoline prices. The prices are only the make believe world the speculators want everyone to believe, it is all price gouging by the oil companies, middlemen and retail distributors.
Joe Fred
Joe Fred Aug 18, 2022 10:28AM ET
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Everyone continues to ignore that since April, 120 plus million bbls have been moved from the SPR into the open market. This will have to be replaced beginning in October if the administration follows through. Assuming it does, that means you immediately have a 2 million bbl reduction in daily supply assuming 1 million bbls/day is put back into the SPR and the daily million not coming out anymore. Is anyone taking this into account? And per your post then realistically the actual inventory is down 110 million since April since the SPR is inventory in essence and isn’t new supply. It’s like saying you made more income this year but you were taking money out of your savings account and calling it income.
Carlos Mercado
Carlos Mercado Aug 18, 2022 10:28AM ET
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Joe Fred stole my thunder :D
Adamo Nals
Adamo Nals Aug 18, 2022 10:28AM ET
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Joe Fred no one takes into account because they don’t use common sense anymore in the markets. Oil is going to $150 a barrel. The only reason like you just said is because of taking from the SPR. We have to re-fill that. And we are already short oil every day almost 2,000,000 barrels. This is simple first grade common sense. WTI is going away higher by the end of the year
Prasanna Tatti
Prasanna Tatti Aug 18, 2022 9:33AM ET
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How come in just 5 days the OPEC and EIA data is proven wrong? There was no demand now there no supply :(
jamie
jamie Aug 18, 2022 6:05AM ET
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Inflation reduction budget looks like in other word inflation booming budget.
jamie
jamie Aug 18, 2022 6:05AM ET
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Thanks Democrates. specially vice president.
Michael Mcdonough
Michael Mcdonough Aug 17, 2022 9:33PM ET
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Oil prices will be going back up..Biden inflation alive and well
Brad Albright
Brad Albright Aug 17, 2022 9:33PM ET
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Why do you hate America?
 
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