Meanwhile, OPEC's new chief thinks concerns about China are overblown: File Image/Pixabay
With the proclamation from one analyst that the crude market was not in as much jeopardy as originally thought but worry about the economy persists, traders on Thursday maintained their cautiously bullish stance and caused oil prices to rise for a second consecutive session, this time by 3 percent.
West Texas Intermediate settled up $2.39 (2.7 percent) to $90.50 per barrel, and Brent settled up $2.94 (3.1 percent) to $96.59 on the lingering strength of the U.S. Energy Information Administration reporting that inventories dropped by 7.1 million barrels in the week to Aug. 12, compared with forecasts for a 275,000-barrel drop.
Traders were also influenced by Ukraine president Volodymyr Zelenskiy telling media he sees no end to the war with Russia without troop withdrawals – suggesting that the status quo of the former Soviet Union being shut out by the international community will remain, thus making tightness an ongoing concern.
Dennis Kissler, BOK Financial
The fundamentals may not be as negative to crude as thought
BCA research said in a note, "The European Union embargoes will force Russia to shut in around 1.6 million (bpd) of output by year-end, rising to 2 million bpd in 2023."
Plus, number of Americans filing for unemployment benefits fell last week and the prior period's data was revised sharply lower, which accompanies healthy demand and market tightness even in the face of much-hyped inflation.
Dennis Kissler, senior vice president of trading at BOK Financial, said, "The fundamentals may not be as negative to crude as thought just a week ago; however, traders are still worried about the overall economic outlook going forward, it's keeping a very nervous trade to the futures market."
Indeed, Bloomberg pointed out that "Aggregate open interest over WTI contracts yesterday was the lowest since January 2015 at 1.54 million contracts."
Still, many insiders are puzzled by the degree of volatility that has affected the crude market of late: for example, Haitham Al Ghais, the new secretary general of the Organization of the Petroleum Exporting Countries (OPEC), said he was bullish about demand and that the hype over China's zero-tolerance Covid lockdowns ruining the economy was overblown.