On Wednesday, oil prices moved higher, boosted by declining U.S. crude inventories, though markets were still constrained by a supply glut. The focus of the market was shifting to the release of official U.S. Energy Information Administration data on Wednesday for a further update on inventories.
Brent crude futures were at $51.14 per barrel, gaining 34 cents, or 0.66 percent, from their previous close. U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $47.82 a barrel increased 27 cents, or 0.56 percent. U.S. crude inventories dropped by 9.2 million barrels in the week to Aug. 11 to 469.2 million, industry group the American Petroleum Institute reported on Tuesday. That compared with analyst expectations for a decline of 3.1 million barrels.
“The market took this as a mildly bullish report,” stated William O’Loughlin of Australia’s Rivkin Securities.
If the API data is confirmed by the U.S. government later on Wednesday it would signify a seventh straight week of a decline in stocks, one of the key metrics for OPEC and other oil producers which have cut output to increase prices.
A drop in Libyan output due to security breaches at a major field was also endorsing Brent. More broadly, analysts said ample supplies were preventing prices from moving much higher.
“Excessive supply … is continuing to weigh on oil prices … Not a lot has changed despite the OPEC and Russia efforts recently. While these producers have tried to limit their oil output, U.S. shale oil continues to rise,” stated Fawad Razaqzada, an analyst at futures brokerage Forex.com. The OPEC together with non-OPEC producers such as Russia has promised to trim output by 1.8 bpd between January this year and March 2018.
Balancing much of that effort, however, U.S. oil production has spiked by nearly 12 percent since mid-2016 to 9.42 million bpd. C-OUT-T-EIA “OPEC and Russia still face an uphill battle in reducing the global supply surplus in the face of growth in output elsewhere and less than compliant behavior in their midst (Iraq, UAE),” stated French bank BNP Paribas.
On the demand side, analysts see a moderate slowdown in fuel consumption growth.
In the United States, energy consultancy Wood Mackenzie stated gasoline demand was already peaking due to improving fuel efficiency and the increase of electric vehicles.
In China, state-owned China National Petroleum Corporation (CNPC) reported gasoline demand would likely peak around 2025 and outright oil consumption would cap around 2030. This will result in oil demand from the world’s two biggest consumers may soon pause, while consumption has already peaked in Europe and Japan.