U.S. crude oil prices remained steady on Friday, poised to secure a fourth consecutive weekly gain driven by robust demand and tightening supply conditions. This trend underscores the persistent bullish sentiment in the market as analysts forecast a tighter oil market for the third quarter, bolstered by rising summer fuel demand and ongoing supply constraints.
The latest data from the U.S. Energy Information Administration (EIA) showed a significant drawdown in crude inventories, with stocks falling by 12.2 million barrels and gasoline inventories decreasing by 2.2 million barrels last week. This depletion of stockpiles suggests an uptick in demand, reinforcing the positive outlook for oil prices.
Current Energy Prices and Market Performance
As of the latest trading session, West Texas Intermediate (WTI) crude for August delivery was priced at $83.88 per barrel, showing no change from the previous day. Year-to-date, WTI has risen by 17%. Brent crude for September delivery dipped slightly by 13 cents to $87.29 per barrel but still reflects a 13% increase for the year. RBOB gasoline futures for August were down 0.7% to $2.58 per gallon, marking a 23% gain year-to-date, while natural gas futures for August fell by 1.7% to $2.36 per thousand cubic feet, representing a 6% decline for the year.
Giovanni Staunovo, a commodity analyst at UBS, highlighted the ongoing trend of declining oil inventories due to strong demand and limited supply growth. "With oil inventories beginning to decline as a result of solid demand and constrained supply growth, investors have started to build oil exposure again," Staunovo noted in a client note on Thursday. UBS projects global oil demand to grow by 1.5 million barrels per day (bpd) this year, surpassing the long-term growth rate of 1.2 million bpd. Staunovo also reaffirmed UBS's forecast that Brent crude prices could reach $90 per barrel in the third quarter.
Analyst Perspectives and Market Dynamics
The market's positive sentiment is echoed by JPMorgan, which also anticipates Brent crude hitting $90 per barrel in August or September. John Evans, an oil analyst at PVM, commented on the current market dynamics, noting, "Those who have kept faith that the driving season would eventually come are glowing in prescience, and the many calls of a much better path for bulls in the third quarter seem to hold true at present."
The recent EIA report indicating a substantial 12.2 million barrel drawdown in U.S. crude inventories significantly exceeded analyst expectations of a 700,000-barrel decrease. This data supports the narrative of strengthening demand and adds bullish momentum to the market.
On the supply side, several developments have further tightened the market. Russian oil producers Rosneft and Lukoil announced sharp cuts to oil exports from the Black Sea port of Novorossiisk in July. Panmure Liberum analyst Ashley Kelty pointed out, "This is a positive signal for the forecast supply deficit over the third quarter, but given Russia's poor adherence to production quotas in the past, it will take some time to see if this will be delivered."
In Canada, Suncor Energy's shutdown of its 215,000 bpd Firebag oil sands site in northern Alberta due to a wildfire has also contributed to supply concerns. Additionally, Hurricane Beryl, a Category 2 storm, made landfall in Mexico, potentially affecting oil projects in U.S. waters if it continues on its projected path.
Global Context and Future Outlook
Saudi Aramco, the state-owned oil giant, has responded to the competitive pressures by reducing prices for its flagship Arab Light crude sold to Asia. The price cut to $1.80 per barrel above the Oman/Dubai average highlights the challenges faced by OPEC producers as non-OPEC supply continues to grow.
Despite the temporary setbacks and fluctuations, the overall trend in the oil market remains positive, with analysts expecting continued strength through the third quarter. The combination of robust demand, strategic supply cuts by OPEC+, and unforeseen supply disruptions has created a bullish environment for oil prices.
