Oil prices rise as supply-demand balance expected to tighten in third quarter

Oil prices rise as supply-demand balance expected to tighten in third quarter


Analyst: OPEC seems very ambitious

Crude oil futures rose Wednesday as traders bet on tightening supplies later in the year. The Federal Reserve’s indication of just one interest rate cut this year and bearish U.S. stockpile data limited the gains.

The Department of Energy sees global demand rising this year by 1.1 million barrels per day, or bpd, up from a previous forecast of 900,000 bpd. The increased demand implies a supply deficit, with world production expected to rise 800,000 bpd in 2024.

Oil prices gained nearly 2% earlier in the day, but pulled back after the U.S. reported a 3.7 million barrel rise in crude oil inventories for last week, compared to analysts’ expectations of a one million barrel draw.

Gasoline stockpiles rose by 2.6 million barrels, compared to 891,000 expected by analysts. Fuel demand increased by 94,000 bpd to about nine million bpd total. Daily average fuel demand has been tepid, or 1.5% lower compared to the same period last year, despite the start of the summer driving season.

Oil pulled back further after the Federal Reserve indicated that only one interest rate cut is in store this year, as opposed to a forecast of three cuts as recently as March, citing “modest” progress in capping inflation.

Here are today’s energy prices:

  • West Texas Intermediate July contract: $78.51, up 61 cents, or 0.78%. Year to date, U.S. oil has gained 9.5%.
  • Brent August contract: $82.61 per barrel, up 69 cents, or 0.84%. Year to date, the global benchmark is ahead 7.4%.
  • RBOB Gasoline July contract: $2.40 per gallon, down 0.05%. Year to date, gasoline has advanced 14%.
  • Natural Gas July contract: $3.03 per thousand cubic feet, down 2.91%. Year to date, gas is up 20.8%.

“In the short term, the oil market is likely to tighten,” Martijn Rats, commodity strategist at Morgan Stanley, told clients in a note. The investment bank sees a 1.2 million bpd deficit in the third quarter, which could push Brent prices to $86 per barrel.

OPEC, meanwhile, stuck to its demand growth forecast of 2.2 million bpd due to solid global economic growth of 2.8% this year. Those forecasts clashed with a bearish outlook from the International Energy Agency, which sees weakening demand and rising supplies.

Stock Chart IconStock chart icon

hide content

WTI vs. Brent

Citi analysts described the recent price action as rangebound, with volatility near a decade low. The bank also expects a tight third quarter due to summer fuel demand, though it anticipates that the planned OPEC+ production increases will make for a “bear market” late in 2024 and into 2025 with Brent falling to $60 per barrel.

Don’t miss these energy stories from CNBC PRO:



Source

Harvard-trained educator: Kids who learn how to use AI will become smarter adults—if they avoid this No. 1 mistake
World

Harvard-trained educator: Kids who learn how to use AI will become smarter adults—if they avoid this No. 1 mistake

Students that copy and paste ChatGPT answers into their assignments, with little thinking involved, are doing themselves a disservice — especially because artificial intelligence really can help students become better learners, according to psychologist and author Angela Duckworth. Instead of distrusting AI, show kids how to properly use it, Duckworth advised in a speech at […]

Read More
U.S. judge prevents Trump from invalidating 5,000 Venezuelans’ legal documents
World

U.S. judge prevents Trump from invalidating 5,000 Venezuelans’ legal documents

U.S. military personnel escort alleged members of the Venezuelan gang Tren de Aragua and the MS-13 gang recently deported by the U.S. government to be imprisoned in the Terrorism Confinement Center (CECOT) prison, as part of an agreement with the Salvadoran government, in San Luis Talpa, El Salvador, in this handout image obtained March 31, […]

Read More
Saylor’s bitcoin buying strategy is ‘exploding’ globally, but Wall Street is skeptical
World

Saylor’s bitcoin buying strategy is ‘exploding’ globally, but Wall Street is skeptical

LAS VEGAS — The bitcoin treasury play that lifted Strategy’s market cap past $80 billion is now being mimicked by meme stock companies, media firms, and multinational conglomerates. But Wall Street isn’t buying all the hype. This week, Trump Media announced plans to raise $2.5 billion to buy bitcoin, and GameStop revealed a $500 million […]

Read More