Oil Jumps as Supplies Shrink in Canada, OPEC+
By Adedapo Adesanya
Oil edged up 1 per cent on Monday as forecasts for oil showed that demand would rise in the second half of the year, while supplies from Canada and the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) declined in recent weeks.
Brent futures rose by 41 cents or 0.5 per cent to $75.99 a barrel, while the US West Texas Intermediate (WTI) futures appreciated by 44 cents or 0.6 per cent to $71.99 per barrel.
The International Energy Agency (IEA), meanwhile, warned of a looming oil shortage in the second half of the year when demand is expected to eclipse supply by almost 2 million barrels per day.
The Paris-based agency raised its forecast for global oil demand by 200,000 barrels per day to 102 million barrels per day, noting that China’s recovery after the lifting of COVID-19 curbs had surpassed expectations, with demand reaching a record 16 million barrels per day in March.
The world’s top oil importer is set to account for nearly 60 per cent of global demand growth in 2023, offsetting, along with India and the Middle East, sluggish demand in developed countries.
The United States and Brazil will lead modest growth in oil supply of 1.2 million barrels per day for the year as OPEC+ cuts agreed in April mean volumes from the producer group will fall 850,000 barrels per day from then through December, the IEA said.
Russian oil exports rose in April to 8.3 million barrels per day, the highest since its invasion of Ukraine, with revenue from the trade up by $1.7 billion on the month to $15 billion, according to the IEA.
Last week, both oil benchmarks gained about 2 per cent in their first weekly rise in five after wildfires shut in large amounts of crude supply in Alberta, Canada.
The impact of voluntary production cuts by OPEC+ is also being felt after going into effect this month.
Oil production in Iraq’s Kurdistan region continued to drop as export flows to Turkey’s Ceyhan port show few signs of restarting after a stoppage that has lasted almost two months.
On Saturday, the Group of Seven (G7) nations pledged at its annual leaders’ meeting to enhance efforts to counter Russia’s evasion of the price caps on its oil and fuel exports.
The G7 singled out China on issues including Taiwan, nuclear arms, economic coercion, and human rights abuses, and this triggered a response from the world’s biggest oil importer, which referred to an “anti-China workshop.”
US President Joe Biden and top congressional Republican Speaker Kevin McCarthy will meet on Monday to discuss raising the federal government’s debt ceiling before the US could face an unprecedented default on June 1.
Oil prices, however, were held in check by a stronger Dollar as the market waited for news on the US debt ceiling talks.
The US Dollar rose against a basket of other currencies, holding just below a two-month high, as investors waited on fresh signals on whether the US Federal Reserve is likely to continue hiking interest rates and watched for news on the US debt ceiling.
A stronger Dollar can weigh on oil demand by making the fuel more expensive for holders of other currencies.