Crude oil futures exhibited minimal movement on Friday but were positioned to secure their second consecutive weekly gain, buoyed by encouraging signs of increasing demand and declining oil and fuel inventories in the United States, the world’s largest oil consumer.
Brent crude futures for August delivery edged lower by 18 cents to settle at $85.53 per barrel by 0656 GMT, following a modest 0.8% increase in the previous session. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures for August delivery retreated slightly by 14 cents to $81.15 per barrel. The July contract had closed at $82.17 per barrel on Thursday, marking a gain of 0.7%.
Oil prices have seen a cumulative rise of approximately 5% since the start of the month, reaching their highest levels in over seven weeks. Analysts at Citi emphasized in their recent report that several factors were contributing to this upward momentum. Among these factors, seasonal spikes in demand during the summer months, geopolitical tensions involving Israel and Hezbollah, and the commencement of the hurricane season were highlighted as key drivers likely to sustain price strength throughout the coming months.
The latest data released by the U.S. Energy Information Administration (EIA) on Thursday underscored notable improvements in oil market fundamentals. Total product supplied, a crucial indicator reflecting U.S. oil demand, surged by 1.9 million barrels per day (bpd) in the week ending June 14, reaching 21.1 million bpd. This robust demand figure suggested a robust recovery in consumption patterns following earlier disruptions.
Moreover, the EIA’s inventory report revealed a substantial drawdown in U.S. crude oil stockpiles, which contracted by 2.5 million barrels to stand at 457.1 million barrels. This drawdown surpassed market expectations, which had anticipated a more modest decrease of 2.2 million barrels. In a further positive development, gasoline inventories also registered a notable decline, falling by 2.3 million barrels to 231.2 million barrels, defying forecasts of a 600,000-barrel increase.
The positive demand indicators were not limited to the U.S. market alone. Analysts from ANZ Research highlighted signs of robust demand recovery in Asia, which bolstered overall market sentiment. Refineries across the region have been progressively resuming operations after scheduled maintenance shutdowns, underscoring improving consumption trends in one of the world’s key oil-consuming regions.
Additionally, Japan’s latest economic data provided further support for oil prices. Core consumer prices in the country grew by 2.5% year-on-year in the last reported month, surpassing earlier expectations and reinforcing expectations that the Bank of Japan would move forward with planned interest rate hikes in the near future.
However, despite these bullish factors, oil prices faced downward pressure following the release of U.S. economic data indicating a decline in new unemployment claims. This development raised speculation that the Federal Reserve might maintain its current stance on interest rates, which could potentially limit economic growth and subsequently dampen oil demand.
In conclusion, the global oil market remains influenced by a complex interplay of supply dynamics, geopolitical tensions, economic indicators, and seasonal factors. The ongoing balance between these factors is expected to dictate the future trajectory of crude oil prices in the coming weeks, with market participants closely monitoring developments to gauge potential impacts on supply and demand dynamics.