By Adedapo Adesanya
Oil prices continued the bullish run on Wednesday as they advanced further from improved fuel demand in the United States, backing expected demand growth and tighter supply.
Brent crude gained 31 cents or 0.25 per cent to trade at $123.90 per barrel while the US West Texas Intermediate (WTI) crude appreciated by 20 cents or 0.16 per cent to $122.30 per barrel.
Even though the US Energy Information Administration (EIA) reported a crude oil inventory build of 2 million barrels for the week to June 3, crude in the Strategic Petroleum Reserve fell by a record amount as refiners’ inputs rose to their highest since January 2020 compared with the 1.5 million barrels of the previous week, leaving inventories at 416.8 million barrels, which was some 15 per cent below the five-year average for this time of the year.
As a growing number of analysts revise their oil price forecasts upwards, the EIA also reported mixed inventory data for fuels.
In gasoline (petrol), the EIA estimated an inventory decline of 800,000 million barrels for the week to June 3, which compared with a draw of 700,000 barrels for the previous week.
Production averaged 10 million barrels per day last week, which was slightly higher than the average for the previous week.
Higher prices were also supported by the expectation of China easing the COVID restrictions, translating into higher demand and imports this summer.
Good news came as the world’s largest oil importer as its stocks traded at a two-month closing high, further signifying anticipation of better days following months of lockdown over COVID-19.
On the supply side, traders noted several countries could face problems boosting output.
The energy minister of the United Arab Emirates (UAE), Mr Suhail al-Mazrouei said efforts by the producer alliance group known as OPEC+ have not been encouraging.
“According to last month’s report, we have seen the conformity (to output cuts) of the OPEC+ group and the conformity was more than 200 per cent,” he said, noting the group was currently 2.6 million barrels per day short of its target.
Since OPEC+ started reversing last year the record cuts in April 2020, the group has been consistently struggling to meet its production quota as many members lack spare capacity or investment to increase production.
OPEC’s African members, Nigeria and Angola, are struggling with their targets, while the leader of the non-OPEC producers in the pact, Russia, is trying to stop a production decline as its oil is now under sanctions, bans, and embargoes in the West.
The alliance decided last week to accelerate its monthly oil production increase to 648,000 barrels per day for July and August as the group looks to compensate for falling production in Russia amid expectations of strong fuel demand this summer.
The International Energy Agency (EIA), meanwhile, warned that Europe, which has sanctioned Russia following its invasion of Ukraine, could face energy shortages.
