Oil Extends Gains Again As Demand Signals Too Strong To Ignore

Even the massive OPEC hike won't ruin the market, says analyst: File Image/Pixabay

Oil trading on Wednesday was a repeat of the previous session, with traders responsible for another (modest) price rise due to possible outcomes of the Red Sea attacks and strong gasoline demand in the U.S.

Brent settled up 4 cents to $70.19 per barrel, and West Texas Intermediate settled up 5 cents to $68.38 per barrel.

The Energy Information Administration confirmed what the American Petroleum Institute earlier reported: that although crude inventories rose by 7.1 million barrels to 426 million barrels in the week ended July 4, gasoline stocks fell by 2.7 million barrels – and gasoline demand rose 6 percent to 9.2 million bpd last week.

Phil Flynn, senior market analyst with Price Futures Group Inc., said, "Overall, demand jumped back up, so the market is taking the build in crude supplies as kind of a one-off."

He added, "If we look at gasoline demand numbers, they're back up to a respectable number."

Further, distillate stocks, which include diesel and heating oil, fell by 825,000 barrels last week compared with expectations for a 300,000-barrel drop.

Also on Wednesday, rescuers pulled six crew members alive from the Red Sea and 15 were still missing from the second of two ships sunk in recent days in attacks claimed by Yemen's Houthi militia.

As for the Organization of the Petroleum Exporting Countries (OPEC) boosting output more than expected for August (by 548,000 barrels per day (bpd) next month instead of the long-planned 411,000-bpd hike), Suhail al-Mazrouei, energy minister for the United Arab Emirates, said oil markets were absorbing the increases without building inventories: clear-cut evidence of strong demand.

For his part, Andrew Botterill, energy, resources and industrials partner at Deloitte Canada, told media the hike isn't likely to have a dramatic increase on prices.

He said, "We do have very robust demand around the globe; that's the reason why we're still talking about high US$60 oil right now is because demand is quite strong, giving opportunity for OPEC to increase those volumes."