Brent Crude Oil, WTI Cross $83 as US Demand Surge

Brent Crude Oil, WTI Cross $83 as US Demand Surge

Prices of crude oil surged on Thursday as data showed demand surge in the US, the world’s largest oil consumer, and with the depreciation of the US dollar. Today, both Brent crude and West Texas Instruments surged above $83 after they slipped strongly in recent times.

According to market data, the International benchmark Brent crude traded at $83.81 per barrel, translating to a 0.43% rise from the closing price of $83.45 per barrel on Wednesday.

The American benchmark West Texas Intermediate (WTI) traded at the same time at $79.66 per barrel, up 0.35% from Wednesday’s session close of $79.38 per barrel.

Crude oil inventories fell by around 6 million barrels to 439.7 million barrels, according to data released by the Energy Information Administration (EIA) on Wednesday.

Similarly, gasoline inventories declined by 300,000 barrels to 216.2 million barrels over the same period. The decrease in crude oil and gasoline stocks over the summer months, when vehicle travel is at an all-time high, signaled a surge in demand in the country, supporting the rise in oil prices.

The weakening of the US dollar against other currencies also aided the rise in oil costs. The US dollar index, which measures the US dollar’s value against other currencies, fell 0.04% to 103.277. The weak dollar is expected to enhance demand by making oil cheaper for buyers who use foreign currencies.

Meanwhile, the slowdown in economic growth in China, the world’s largest oil importer, and the expectation of further interest rate hikes in the US limited price rises. Broader market concerns have weighed on the complex, whilst a stronger dollar has only provided further headwinds. However, for oil at least, the fundamentals remain constructive.

The oil market continues to come under pressure, with Brent falling 1.7% yesterday, following a raft of weaker-than-expected Chinese macro data this week. The latest Fed minutes will not be helping sentiment, with them suggesting that the US Fed may have some more work to do when it comes to monetary tightening.

The strength in the USD over much of the week will also be providing further headwinds to the market. As for WTI, it settled below US$80/bbl for the first time since early August, according to analysts notes.

However, whilst there are broader market concerns, oil fundamentals remain largely constructive as continued OPEC+ supply cuts should ensure that we see sizeable inventory draws for the remainder of the year.

The EIA’s weekly inventory report was largely constructive, showing that US commercial crude oil inventories fell by 5.96MMbbls over the last week. 

This leaves crude oil inventories at a little under 440MMbbls, which is the lowest level since the start of the year. Crude oil inventories at Cushing fell by 837Mbbls, leaving them at 33.8MMbbls- levels last seen back in April.

The large draw in commercial inventories was largely driven by a rebound in crude oil exports, increasing 2.24MMbbls/d week on week. Refiners also increased their run rates by 0.9pp over the week to 94.7%.

Although despite stronger refinery activity, gasoline inventories still fell by 262Mbbls, whilst distillate stocks grew by 296Mbbls.

Labour talks in Australia look as though they will roll into next week in an attempt to avoid strike action at several LNG facilities after there was no breakthrough in negotiations earlier this week.

Reports suggest that talks will continue next Wednesday.  The fact that talks are expected to continue next week has provided some comfort to the market, with TTF settling  2.65% lower yesterday.

For Europe, given the comfortable storage situation (90% full), ING analysts said they would need to see a large amount of the roughly 41mtpa LNG capacity at risk, disrupted for a prolonged period, in order to be overly bullish for prices. #Brent Crude Oil, WTI Cross $83 as US Demand Surge Dollar Index Decreases by 1.6% in July

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