Oil edges up with robust global demand tightening crude market
Oil rose amid expectations that recovering demand from the U.S. to India and Spain will further tighten global crude markets.
Futures in New York climbed as much as 1.2% on Thursday after posting the biggest gain in three months on Wednesday. Gasoline demand is essentially back to normal in many of the biggest oil-consuming countries, with road traffic data showing a similar trend. The market recovery has spurred China to supply crude from its strategic reserves to local refiners in a bid to cool prices.
"The fundamental backdrop is bullish because of just the structural deficit that we're in," said John Kilduff, a partner at Again Capital.
Oil has rebounded after a nearly 8% loss on Monday as fears around the delta variant and its impact on economic recovery shook broader markets. The price plunge came just after a weekend meeting of OPEC+, at which the 23-nation alliance led by Saudi Arabia and Russia finalized plans to restore halted production.
"It's just not enough oil," said Kilduff. "The 400,000 barrel-a-day increase monthly is not going to get the job done and you're going to see these inventories globally continue to tighten and tighten."
West Texas Intermediate crude for September delivery rose 42 cents to $70.72 a barrel at 10:43 a.m. on the New York Mercantile Exchange.
Brent for September settlement added 40 cents to $72.63 a barrel on the ICE Futures Europe exchange.
Brent's prompt timespread was 60 cents a barrel in backwardation. While that's a bullish pattern -- with near-dated prices above those further out -- it compares with 70 cents a barrel a week ago.
In the U.S., an inventory report released this week showed declining fuel and distillate supplies with the summer driving season well underway. Oil inventories at the nation's key storage hub in Cushing, Oklahoma, fell to the lowest since January 2020.
China's Strategic Petroleum Reserve supplied about 3 million tons, or 22 million barrels, to processors earlier this month, according to people familiar with the situation. The move was intended to cool prices, the people said. The operation might weaken Chinese demand for imported crude.