Oil Rises As Demand Fears Ease After IEA Boosts Growth Outlook
Oil fell as US data on stockpiles and production signaled an easing of market tightness, and a key European pipeline restarted flows.
(Bloomberg) -- Oil gained as worries about a slowdown in consumption eased after the International Energy Agency boosted its forecast for global demand growth this year.
West Texas Intermediate rose about 3% to trade near $94 a barrel with Brent again nearing $100. The IEA lifted its consumption estimate by 380,000 barrels a day, saying soaring natural gas prices and heat waves are prompting industry and power generators to switch their fuel to oil.
Buffeted by bullish and bearish headlines in recent days, crude remains largely rangebound near a six-month low. A brief halt of Russian flows to some parts of Europe and weaker-than-expected US inflation data pushed prices higher. The subsequent resumption of Russian supply -- as well as renewed attempts to resurrect the Iran nuclear deal -- have since weighed on the market.
“It looks like demand worries might be a bit overdone, and extremely high gas prices will support oil demand during winter with gas-to-oil switching,” said Helge Andre Martinsen, a senior oil analyst at DNB Bank ASA.
Nationwide average retail pump prices dropped back below $4 a gallon after peaking at a record above $5 in mid-June, according to data from auto club AAA. The decline in prices may be brief. Retail gasoline may surge back above $5 and Brent oil futures could go as high as $130 per barrel, Damien Courvalin, Goldman’s head of energy research, said in a Bloomberg Television interview.
Still, there are signs of weakness in the futures market. It is most evident in a narrowing of closely watched time differentials. WTI’s prompt spread -- the gap between its two nearest contracts, which has shrunk to about 87 cents a barrel in backwardation, down from $2.88 a month ago. The comparable measure for global benchmark Brent was at $1.34 a barrel, down by about two-thirds in the same period.
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