By Adedapo Adesanya
Crude oil prices rose on Thursday after the United States Energy Information Administration (EIA) report showed rapidly declining inventories and record-high fuel demand in the midst of the peak summer driving season.
The EIA reported an inventory draw of 6.9 million barrels for the week to July 2 compared with a draw of 6.7 million barrels for the previous week. Analysts had expected the EIA to report a 3.925 million barrels draw in crude oil inventories for the week.
This is coming after the American Petroleum Institute (API) reported a seventh straight weekly inventory draw on Wednesday. API estimated that US crude oil inventories fell by 7.983 million barrels for the review period.
Global supplies have tightened amid strong recoveries in economies such as the US and China, leading to calls for the alliance to increase supply in the coming months. In the US, the driving season has seen increased demand following the phasing out of lockdowns.
These developments caused the price of the Brent crude to rise yesterday by 10 cents or 0.17 per cent to $74.22 per barrel and pushed the West Texas Intermediate (WTI) crude higher by 19 cents or 0.28 per cent to $73.13 per barrel.
Meanwhile, the discord between the United Arab Emirates (UAE) and Saudi Arabia, which threatens to unravel the entire production pact that has been in place since April 2020, continues to weigh heavily on the market.
This dispute between the two members of the Organisation of the Petroleum Exporting Countries (OPEC) is putting a cap on prices as concerns remain that countries may begin to pump oil into the market at will.
The two Gulf allies are at odds over a proposed deal that would have brought more oil to the market.
Russia is trying to mediate to help strike a deal to raise output, while the United States confirmed that it had high-level conversations with officials in Saudi Arabia and the UAE.
Meanwhile, the spread of the Delta variant of COVID-19 is also adding to fresh concerns about demand as the World Health Organisation (WHO) urged caution on the pace of reopenings worldwide, with many regions seeing infections spreading.
Japan declared a state of emergency that will include the period of the Olympics and officials are now considering whether to allow spectators at all. In Southeast Asia, Indonesia is registering record COVID cases, while Thailand’s plan to fully re-open to foreign tourists in three months have been foiled by surging cases.
Analysts noted that the variant and others of concern could very well to slow the rate of demand recovery, even in the United States.
Modupe Gbadeyanka