Oil Enjoys Modest Rebound Off The Back Of U.S. Inventory Draws

But unless China's air travel escalates crude won't reach $100 this year: File Image/Pixabay

Oil on Thursday resumed its winning streak, supported by the earlier announcement of an unexpected drop in U.S. crude and gasoline inventories, as well as an export block in Iraq offsetting a smaller than anticipated cut to supplies in Russia.

Brent rose 99 cents, or 1.3 percent, to $79.27 per barrel, while West Texas Intermediate rose $1.40, or 1.9 percent, to $74.37.

The Iraq block of an estimated 450,000 barrels per day (bpd) crude export is the result of an arbitration decision, and the pipeline stoppage is expected to continue until Ankara, Baghdad and other sources find a settlement to resume flows.

In the U.S., crude inventories dropped by 7.5 million barrels compared with expectations for a rise of 100,000 barrels, and this caused Phil Flynn, senior market analyst at Price Futures Group Inc., to observe that, "Traders are starting to let yesterday's inventory numbers sink in a little bit."

Indeed, despite a bearish sentiment that until recent days was growing steadily, the outlook continues to look solid for the crude sector: UBS stated on Thursday, "While we think oil prices may remain volatile in the near term, we still expect rising Chinese crude imports and lower Russian production to lift prices over the coming quarters."

This was supported by state energy giant PetroChina, which on Thursday predicted that China's refined fuel consumption in 2023 is likely to grow 3 percent from pre-COVID levels.

However, jet fuel demand is reportedly lagging and, if true, means that chances of oil prices reaching $100 later this year are slim.

Still, while major banks including Barclays, ING, and Goldman Sachs have slashed their oil price forecasts for this year, they still expect prices to average more than $80 per barrel, and even over $90, in 2023.