Adedapo Adesanya
By Adedapo Adesanya
Oil prices edged higher on Tuesday on the projected healthier outlook of the United States economy, but bearish data on China’s crude imports and exports weighed.
Brent crude futures gained 83 cents to settle at $86.17 a barrel, while the US West Texas Intermediate crude rose 98 cents to $82.92 per barrel.
Both contracts had fallen by $2 earlier in the session, but prices reversed course after a monthly report from the US Energy Information Administration (EIA) projected gross domestic product growth to rise by 1.9 per cent in 2023, up from 1.5 per cent in a previous forecast.
The EIA also expects Brent crude oil prices to average $86 in the second half of 2023, up about $7 from the previous forecast.
It also forecast that crude production in the US, the largest consumer of the commodity, is expected to rise by 850,000 barrels per day to a record 12.76 million barrels per day in 2023, the report added, overtaking the last peak of 12.3 million barrels per day in 2019.
Crude prices have been rising since June, primarily because of extended voluntary cuts to Saudi Arabia’s crude oil production as well as increasing global demand.
“We expect these factors will continue to reduce global oil inventories and put upward pressure on oil prices in the coming months,” the EIA said.
Rising global oil production in 2024 is expected to keep pace with oil demand and put downward pressure on crude oil prices beginning in the second quarter of 2024, it added.
However, numbers out of China, the world’s second-largest economy, impacted the gains as July oil imports were down 18.8 per cent from the previous month to the lowest daily rate since January but still up 17 per cent from a year earlier.
Overall, China’s imports contracted by 12.4 per cent in July, far steeper than the expected 5 per cent drop. Exports fell by 14.5 per cent, compared with a fall of 12.5 per cent expected.
Despite the gloomy data, some analysts were still positive about China’s fuel demand outlook for August to early October.
The peak season for construction and manufacturing activity starts in September, and gasoline consumption should benefit from summer travel demand, according to analysts.
Crude oil inventories in the US unexpectedly rose unexpectedly this week by 4.067 million barrels, the American Petroleum Institute (API) data showed on Tuesday—just one week after seeing the largest dip in inventories ever of 15.4 million barrels.
Analysts were expecting a draw of 233,000 barrels in U.S. crude-oil inventories. The total number of barrels of crude oil gained so far this year is nearly 24 million barrels, according to API data, although there is a net draw in crude inventories since April of 23 million barrels.
US government data from the EIA on stockpiles is due on Wednesday.
