Oil Overbought As Market Hurtles Towards Supply Shortage

Meanwhile, the U.S. muscles its way to crude  export prominence: File Image/Pixabay

Oil prices dipped on Thursday, with rudderless analysts seemingly unable to resolve their conflicting demand and supply shortage concerns despite indications that the second half of this year will be characterized by stronger than anticipated demand draining inventories.

As of 16:15 GMT, Brent fell 43 cents to $88.92 per barrel and West Texas Intermediate fell 57 cents to $84.86 per barrel.

While Bloomberg summed up Thursday's trading by stating that "investors cashed out and the market settled in overbought territory," it stressed that market outlook remains bullish: "The nearest timespreads for WTI and global benchmark Brent are in extreme backwardation as traders pay bumper premiums to keep crude supplies local."

Additionally, JPMorgan Chase & Co. suggested in a note that demand appears to be holding up amid higher prices, with global consumption of transport fuels picking up last week due to Chinese trucking activity and an increase in international travel ahead of the Golden Week holiday.

These ruminations were in line with the Bank of America in the previous session forecasting that improving economic growth expectations should push the oil market into a 450,000 barrel per day (bpd) deficit in the second and third quarters of this year, with Brent averaging $86 per barrel compared with earlier estimates of $80 per barrel.

In other oil news on Thursday, Gary Ross, an oil consultant turned hedge fund manager at Black Gold Investors, told media that "U.S. production is going up and OPEC and Russian production is going down — so the U.S., by definition, is going to have more market share."

Energy Information Administration data showed that U.S. crude oil exports averaged an all-time high of 4.1 million bpd last year, having jumped by 13 percent, or by 482,000 bpd, from the previous record set in 2022; and since most U.S. crude production is light, sweet crude oil, it has created export incentives for market participants.