By Teddy Nwanunobi
Latest information from the Organisation of the Petroleum Exporting Countries (OPEC), following its meetings of July 12 to 14, said that the crude oil futures rose on July 13 as strong demand combined with the anticipation for bullish draws in US inventories to boost prices, and overwhelm bearish sentiment from spiking US inflation numbers that perked up the dollar.
According to the information, front-month NYMEX WTI added $1.15 per barrel to settle at $75.25 per barrel, and ICE September Brent gained $1.33 per barrel cents to $76.49 per barrel.
“Refined product prices spiked even more notably as US demand for fuel has heated up in July. NYMEX August RBOB jumped 4.11 cents to $2.3183 per gallon, and August ULSD spiked by 3.46 cents to $2.1844 per gallon.
“S&P Global Platts projected the US Energy Information Administration (EIA) would report July 14 that total US commercial crude oil stocks likely declined by 4.9 million barrels to 440.6 million barrels, according to surveyed analysts.
“The draw would leave stocks nearly 7 per cent behind the five-year average of US Energy Information Administration data and the lowest since the week ended January 31, 2020. The eight-week streak of declines would push commercial stocks down by nearly 50 million barrels from mid-May.
“While the ongoing OPEC+ stalemate on unwinding production cuts is keeping a ceiling on crude prices for now, the International Energy Agency (IEA) warned July 13 a prolonged deadlock eventually could lead to a painfully tight global oil market, and much higher oil prices.
“Also, Iran alleviated any concerns of a surprise injection of new crude barrels by acknowledging that nuclear accord talks are unlikely to pick back up before August when the new Iranian president – hardliner Ebrahim Raisi – takes office, and even then there is no certainty of any deal in the foreseeable future.
“Partially mitigating the higher crude prices, however, was a spike in the dollar after the Labour Department said the consumer price index increased by a larger-than-expected 5.4 per cent from a year earlier, boosted by rises in vehicle, food and energy costs. That was the largest jump since August 2008, just before the worst of the Great Recession,” it stated.
However, after crude prices traded down early in the day on inflation news, bullish crude oil and product sentiment swung prices further up throughout the morning and afternoon.
“Crude prices are all over the place as energy traders try to price in a tighter market thanks to OPEC+, while a hot inflation report sent the dollar higher.
“Many traders are looking ahead to the US crude oil inventory data, which could show yet another significant drop in stockpiles. The supply deficit story, along with still-improving demand in Q3 (third quarter), suggests whatever oil weakness is happening could be short-lived. The oil market could get a lot tighter very quickly, and that could mean the recent pullback might have run its course,” senior market analyst for OANDA, Edward Moya, said.
Rystad Energy said on July 13 that it projected that the world’s recoverable crude oil supplies would be 9 per cent lower than a year ago, as the ongoing energy transition away from fossil fuels requires that more potential crude supplies be left in the ground.
On the other hand, despite the more bullish demand views in the US, the rest of the world, including Asia, Europe and Australia, are fearing more lockdowns from the spread of the COVID-19 delta variant outpacing ongoing vaccine rollouts.
“The market is aware, however, that the blockbuster rebound in oil product demand in the US is not a trend being repeated around the rest of the world, where many countries are still very much in the trenches of getting the COVID-19 virus under control. The delta variant is the wild card of the bearish deck, and could change the oil demand recovery trajectory for many key oil-consuming countries, especially where vaccination rates are not yet at a satisfactory level,” Rystad oil markets analyst, Louise Dickson, said.
Despite IEA’s warning that global supplies, already drained by country reopening, could tighten further, WTI crude futures rose by more than $1 per barrel on July 13.
August Nymex light sweet crude futures rose by $1.15 per barrel to settle at $75.25 per barrel, the highest since October 3, 2018, while September Ice Brent rose by $1.33 per barrel to settle at $76.49 per barrel.
Meanwhile, the September Brent-September WTI spread widened to $1.80 per barrel.