Conflicting Demand Sentiment Prevails, Oil Ekes Out Modest Gains

by Ship & Bunker News Team
Thursday May 16, 2024

A 2.5 million barrel draw of U.S. stockpiles last week was enough to counteract bearish sentiment in the wake of reports of softening demand – and oil prices on Wednesday climbed minimally as a result.

Brent settled up 37 cents at $82.75 per barrel, while West Texas Intermediate climbed 61 cents to $78.63.

The stockpile climbs, which never fail to momentarily influence oil traders, were against expectations for a 543,000 barrel draw; as for demand, the International Energy Agency cut its global demand growth forecast by 140,000 barrels per day (bpd) to 1.1 million bpd as demand reportedly softened in developed economies in the first quarter.

With regards to the draws, Bob Yawger, director of energy futures at Mizuho, said, "The crude oil draw is mostly from the increase in the refinery utilization rate ... Refiners finally got serious about that, finally cranked it up a bit."

The grim demand prognostications caused analysts at Rystad Energy to express a contrary bullish sentiment; they pointed out that they expect strong global demand for gasoline and European jet fuel this year.

Meanwhile, hopes for central banks lowering their interest rates were kindled yet again on Wednesday, thanks to news that U.S. consumer prices increased less than expected in April, suggesting that inflation resumed a downward trend at the start of the second quarter.

In other oil news on Wednesday, Alexei Miller, CEO at Russia's Gazprom, arrived in Iran to discuss  the crude market with that country's oil minister; the talks come at a time when Gazprom is suffering from the impact of Western sanctions (it reported a 2023 net loss of nearly $7 billion, its first loss in more than two decades).

At the same time, Russian president Vladimir Putin was in China for high-level talks, one of the topics possibly being the prospect of construction on the Power of Siberia-2 pipeline, which would transport 50 billion cubic meters of gas annually from Russia to China, via Mongolia.