Americas News
Oil Rebounds As Analysts Decide That Demand Is Robust After All
At a time when analytical insight suggests that demand for crude is strong one day and in serious jeopardy the next, it's no surprise that Wednesday saw a reverse of earlier price losses thanks to a "revival" of U.S. demand, which caused West Texas Intermediate to rise by 1.8 percent.
WTI for September settled up $1.58 at $88.11 per barrel and Brent for October settled up $1.31 at $93.65, after the Energy Information Administration showed inventories dropping by 7.1 million barrels in the week to Aug. 12, compared with forecasts for a 275,000 barrel drop.
Also, U.S crude exports hit 5 million barrels per day (bpd), the highest on record, as WTI traded at a steep discount to Brent; moreover, gasoline stocks decreased 4.6 million barrels, much higher than the expected 1.1 million barrel draw.
Noah Barrett, lead energy analyst at Janus Henderson, said, "Concerns over some of the weakness in the implied demand data over the past several weeks could be overblown."
Phil Flynn, senior market analyst at Price Futures Group Inc., added, "Some of those demand destruction concerns that the market was going through seem to be alleviated a little bit."
And while less than 24 hours ago oil prices plummeted on fears that Iran's possible return to the international stage combined with poor economic growth could cause an overabundance of inventories, Ed Moya, senior market analyst at Oanda Corp., remarked on Wednesday, "A very bullish EIA crude oil report eased global recession fears and reminded energy traders on how limited spare capacity there is for oil markets."
Similarly, less than a week after trimming its output forecasts based on the contention the global market will tip into surplus this quarter (thus contributing to bearish sentiments), the Organization of the Petroleum Exporting Countries (OPEC) on Wednesday struck a different tone when its new secretary-general Haitham Al Ghais told media he was confident world oil demand will rise by almost 3 million bpd this year while spare production capacity was "becoming scarce."
Al Ghais went on to remark that his cartel was not to blame for soaring inflation or high prices at the pump and instead fingered chronic under investment in the oil and gas industries as the culprit: "This is the harsh reality that people have to wake up to and policymakers have to wake up to; once that is realized I think then we can start to think of a solution here, and the solution is very clear…...invest, invest, invest."
For its part, the International Energy Agency calculates that oil and gas investment jumped by 10 percent from last year but remains "well below" 2019 levels; and while global energy investment was on track to reach $2.4 trillion, most of the projected rise would be due mainly to clean energy.
