Crude oil futures rose on Wednesday as traders bet on tighter supplies later in the year. The Fed's signal to cut interest rates only once this year and bearish US inventory data limited gains.
The Ministry of Energy expects global demand to rise this year by 1.1 million barrels per day, up from previous expectations of 900,000 barrels per day. The growing demand indicates a supply deficit, as global production is expected to rise by 800,000 barrels per day in 2024.
Oil prices rose nearly 2% earlier in the day, but retreated after the United States reported a 3.7 million barrel build in crude oil inventories last week, compared to analysts' expectations of a 1 million barrel draw.
Gasoline inventories rose by 2.6 million barrels, compared to the 891,000 that analysts had expected. Demand for fuel increased by 94 thousand barrels per day to about nine million barrels per day. Average daily fuel demand was tepid, or 1.5% lower, compared to the same period last year, despite the start of the summer driving season.
Oil fell further after the Federal Reserve indicated there would be only one rate cut this year, contrary to expectations of three cuts in March, citing “modest” progress in curbing inflation.
Here are today's energy prices:
West Texas Intermediate July contract: $78.51, up 61 cents or 0.78%. Year-to-date, the price of US oil has risen by 9.5%.Brent August contract: $82.61 a barrel, up 69 cents, or 0.84%. Year-to-date, the global index advances by 7.4%.RBO gasoline July contract: $2.40 per gallon, down 0.05%. From the beginning of the year to date, the price of gasoline has increased by 14%.natural gas July contract: $3.03 per thousand cubic feet, down 2.91%. Year to date, the price of gas has increased by 20.8%.
“In the short term, the oil market is likely to tighten,” Martin Ratz, commodities strategist at Morgan Stanley, told clients in a note. The investment bank expects a deficit of 1.2 million barrels per day in the third quarter, which could push Brent prices to $86 per barrel.
Meanwhile, OPEC stuck to its demand growth forecast of 2.2 million barrels per day due to strong global economic growth of 2.8% this year. These expectations conflicted with negative expectations from the International Energy Agency, which expects weak demand and high supplies.
WTI vs. Brent
Citi analysts described the recent price action as range-bound, with volatility near a decade low. The bank also expects a tight third quarter due to summer fuel demand, although it expects planned increases in OPEC+ production to lead to a “bear market” in late 2024 and into 2025 with Brent falling to $60 a barrel.
