- WTI has recovered and is back above $120 after the latest US EIA inventory report showed an unexpected drop in gasoline stocks.
- Prices remain well supported in a context of strong and growing demand, in addition to supply problems from OPEC+/Russia.
- The bulls will continue to target a test of $130 in the coming weeks.
Despite the just released US EIA weekly crude oil inventories data confirming that, as the API private weekly inventory report had hinted, US crude oil inventories While stocks unexpectedly rose last week, data continued to show a decline in gasoline inventories, suggesting that US demand remains strong. This contributed to WTI futures of the previous month rose again from session lows in the mid-$119.50 per barrel to $120.50 per barrel, leaving prices not far below multi-month highs reached earlier in the session, in the $121.
Traders also cited reports of a possible production halt in Norway, amid strike threats by oil sector workers, as modest support. Crude oil prices have traded on a bullish trajectory in recent sessions and weeks, with demand increasing in North America and Europe as the peak summer driving season arrives and in China as Beijing and Shanghai reopen with the Covid- 19 apparently controlled there. Against the backdrop of strong and recovering demand, global oil markets are currently very tight.
Reuters reported on Wednesday that diesel refinery margins are at record highs in Asia and most global refineries are running near full capacity, as Russian exports of refined products fall amid Western sanctions over its war. in Ukraine. Analysts believe that last week’s OPEC+ decision to increase production quotas by 648,000 barrels per day in July and August is insufficient to compensate for the loss of Russian production this summer, given that these production increases were spread evenly among the OPEC+ producers, many of whom cannot really increase production.
“Unless new capacity from the Middle East comes online faster than we expect or China decides to lift its product export caps, the (refined) product shortage will only get worse as demand for fuels for transportation to increase during the northern hemisphere summer,” JP Morgan said in a note on Wednesday. On the other hand, the CEO of Trafigura stated that oil could reach $150 this year in the current context.
Taking all of the above into account, it seems more likely that WTI will continue its recent bullish trajectory that has seen it rise by more than $16 a barrel since the beginning of May. Oil bulls will continue to point to a test of the March highs near $130 in the coming weeks.
Technical levels
Source: Fx Street
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