Oil Posts Weekly Gain As Analysts Continue To Disagree On State Of Supply And Demand

Meanwhile, China refiners are set to radically cut crude throughput due to lockdowns: File image/Pixabay

Oil prices on Thursday posted a daily gain and rose over 8 percent for the week amid a host of conflicting reports on the state of inventories and demand, and as the European Union was said to be moving toward adopting a phased-in ban on Russian oil.

Brent rose $1.35, or 1.30 percent at $110.19 per barrel, while West Texas Intermediate gained $1.24, or 1.18 percent, at $105.48 per barrel at 1706 GMT.

Andrew Lipow, president of Lipow Oil Associates, said a phased-in ban would force European buyers "to seek alternative sources, some of which in the near term is being met by Strategic Petroleum Reserve releases, but in the future, more supplies coming out of the ground will be required."

The recent reserve release by the U.S. and allies, combined with China’s zero infection policy against Covid leading to more government-mandated lockdowns in that country, has caused a rollercoaster-style pattern of crude trading in the past few weeks.

Mike Tran, analyst at RBC Capital Markets, noted that  “Government energy intervention, the perceived self-shunning of Russian crude and the erratic buying patterns in recent weeks have all altered the near-term path,” and moving forward trading looks “volatile and sloppy over the near term as the market digests the onslaught of 240 million barrels of crude unleashed from strategic reserves.”

That’s perhaps the safest assessment of upcoming trading patterns, given that analysts can’t seem to agree on anything to do with supply or demand: on Thursday Salih Yilmaz, senior energy analyst for Bloomberg Intelligence, said that oil risks are skewed to the upside due to a multi-year deficit coming later this year - the outcome of Russia’s invasion of Ukraine prompting widespread sanctions by other countries.

Yilmaz added that calculations point to an undersupply of up to 1 million barrels per day (bpd) in the second quarter – but this is contrary to expectations of the International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC) for a surplus.

Yilmaze reinforced his conviction about a deficit by pointing out that OPEC has refused to raise its output levels, and many other countries are unable to do so.

Meanwhile, inventories in China are reportedly bulging, and refiners in that country are set to cut crude throughput this month by about 6 percent accordingly, a scale last seen in the early days of the COVID-19 pandemic two years ago.

In other oil related news on Thursday, analysts are now conceding that the “surprise” build in U.S. inventories announced earlier this week was due largely to the SPR releases (stocks climbed 9.38 million barrels to 421.75 million barrels in the week ended April 8); they also acknowledged that demand still seems to be robust with gasoline declining 3.65 million barrels to 233.14 million barrels and distillates falling 2.9 million barrels to 111.4 million barrels.