Oil prices might have bounced back last week from the post-OPEC+ meeting sell-off the week before, but market fundamentals continue to tell another story.
On the one hand, the International Energy Agency once again revised downwards its forecasts for global oil demand growth, and US weekly inventories registered a surprise rise of 3.7 million barrels.
On the price front, Brent crude traded up at around $US82.67 at the close, and US West Texas Intermediate ended around $US78.08 a barrel.
That left Brent up 4% for the week and WTI up 3.6%.
However, this increase is more due to the slide in US bond yields, which offset a slight rise in the value of the greenback. The Federal Reserve left a rate cut on the table for this year and raised its US inflation forecasts, but left GDP unchanged. The World Bank, on the other hand, boosted its US growth forecast from 1.6% to 2.5%.
Consumer and producer price data showed cost pressures are easing slowly at the retail level, but easing nonetheless.
Since this week, oil prices have risen nearly 8% from a four-month low of US$73.25 on June 4, following the OPEC+ group's announcement to return more than 2 million barrels a day in cuts next year after extending them to the end of September.
The price rise since then is more due to seasonal expectations for higher summer demand in the US driving season.
Oil bulls continue to believe in price fairies at the bottom of the oil field, it seems, ignoring the US where oil companies continue to slash active rig numbers and stocks continue to rise.
The US Energy Information Administration (EIA) reported that stocks rose in four of its last five weekly reports, including last week.
The EIA said commercial crude stockpiles in the US were up 3.7 million barrels to 459.7 million in the week to June 7. The consensus estimate was for a drop of 1.5 million barrels.
While OPEC still sees demand rising this year by 2.2 million barrels a day, the International Energy Agency has trimmed its forecast by 100,000 barrels a day to just 960,000, which was double that a few months ago.
Additionally, there’s a continuing fall in active oil rig numbers—down again last week to 488, four lower than the week before and 12 less than at the end of 2023.
Data from oil services group Baker Hughes showed that active gas and miscellaneous rig numbers were unchanged at 98 and four, respectively.
A year earlier, the US had 552 oil, 130 gas, and five miscellaneous rigs in operation. US production has risen to 13.1 million barrels a day from 12.34 million a year ago.
Overall, 590 rigs were operating in the US last week, down from 687 a year earlier.
