scorecardresearchOil holds near five-month high as US, China show tighter market

Oil holds near five-month high as US, China show tighter market

Updated: 13 Apr 2023, 06:23 PM IST
TL;DR.

  • Crude inventories declined again last week at the key American storage hub in Cushing, Oklahoma, while weaker Russian oil exports and interrupted flows from Iraqi Kurdistan are reining in supplies.

West Texas Intermediate futures held near $83 a barrel after gaining 4.4% over the past two days.

West Texas Intermediate futures held near $83 a barrel after gaining 4.4% over the past two days.

(Bloomberg) -- Oil traded near a five-month high as falling US inventories and surging Chinese imports added to signs of a tightening global market.

West Texas Intermediate futures held near $83 a barrel after gaining 4.4% over the past two days. Crude inventories declined again last week at the key American storage hub in Cushing, Oklahoma, while weaker Russian oil exports and interrupted flows from Iraqi Kurdistan are reining in supplies.

China shipped in the most oil in almost three years in March, indicating robust demand as the world’s largest crude importer leaves Covid Zero behind, according to official figures released on Thursday. Record Russian flows drove the increase.

Crude has rebounded strongly since hitting a 15-month low in March, with widely watched timespreads pointing to a tightening of conditions. Oil’s swift resurgence has also been supported by signs that US inflation is moderating, potentially enabling the Federal Reserve to pause its rate-hike campaign.

The Organization of Petroleum Exporting Countries signaled in a report that global markets are on track for a hefty and progressively deeper supply deficit after the group and its allies announced a surprise output cut earlier this month. On Wednesday, Fatih Birol, head of the International Energy Agency, called the cutback a “bad surprise.”

“In the very short term, we expect consolidation after the recent OPEC+ cut-induced price rally,” said Helge Andre Martinsen, a senior oil analyst at DNB Bank ASA. “We estimate the global oil market balance to flip to undersupply as soon as May, and so remain positive on oil prices for the rest of the year.”

WTI’s prompt spread — the difference between its two nearest contracts — flipped back into backwardation this month, a bullish pattern. For global benchmark Brent, the December-December differential is approaching $6 a barrel in backwardation, up from about $4 a barrel a month ago.

 

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First Published: 13 Apr 2023, 06:23 PM IST