Mixed economic data from China contributes to oil price rally
Risk-on sentiment in global markets supports commodity
Summer fuel demand expected to draw down inventories and tighten market in Q3
U.S. crude oil prices surge past $81 per barrel
WTI reaches $81, Brent reaches $85.33
U.S. crude oil prices continued to rise on Tuesday, with West Texas Intermediate (WTI) surpassing $81 per barrel and Brent reaching $85.33 per barrel, as risk-on sentiment in global markets supported the commodity.
Analysts expect summer fuel demand to draw down inventories and tighten the market in Q3, despite recent declines due to OPEC members rolling back barrels onto the market in Q4.
According to reports, China's retail sales for May surpassed economist forecasts while industrial output and fixed asset investment disappointed. This mixed economic data from China, the world's largest importer of crude oil, has contributed to the rally in energy prices.
Key oil timespreads have also indicated a tightening market, with Brent's prompt spread closing at its strongest level since April.
Despite these positive signs for the oil market, some analysts remain cautious about Q4 balances and beyond. TD Securities' Ryan McKay noted that there is still relative concern about inventory levels in the fourth quarter.
Oil prices had previously declined due to OPEC members rolling back barrels onto the market in Q4. However, with summer fuel demand expected to draw down inventories and tighten the market in Q3, some analysts are optimistic about the future of oil prices.
Sources:
CNBC: U.S. crude oil rises more than 1%, tops $81 per barrel as rally continues
Yahoo Finance: Oil Advances as Risk-On Sentiment Helps to Support Commodities
US gasoline cracks are notably higher than elsewhere, currently around $22 per barrel
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The article contains selective reporting as it focuses on the negative impact of low gasoline demand and refinery run cuts in Asia, while mentioning the higher US gasoline cracks and high US refinery utilization rates only in passing. It also implies that Chinese refinery runs are disappointing without providing any context or comparison to previous years or industry averages.
The pressure on gasoline might increase further down the line as this year’s two main refinery newbuilds, Nigeria’s Dangote and Mexico’s Olmeca, are both delayed and will not start up in time for the summer season.
Oil markets were eagerly anticipating the start of peak driving season in the summer, but gasoline demand so far has been mostly disappointing,
Asia has been the first continent where gasoline weakness led to refinery run cuts,
Chinese refinery output slid 1.8% year-over-year in May to 14.25 million b/d,
