Tuesday saw a significant increase in oil prices, which rose by around 2% after being supported by a weakening US dollar, expectations for increased demand in the developing world, and production curbs by the major oil exporting nations. The price of Brent futures increased by $1.71 or 2.2% to close at $79.40 a barrel. West Texas Intermediate (WTI) crude for the United States increased $1.84 or 2.5% to close at $74.83.
The settlement for WTI and Brent were both at their highest levels since May 1. Technically, Brent was overbought for the second time in three days. According to Craig Erlam, a senior market analyst at OANDA, “the break of the recent high could be viewed as a bullish step that could give (Brent) the momentum to break back above $80.” At this point, the surge still has momentum, he said.
Additionally, U.S. diesel futures were expected to settle at their highest level since April 18. A day after many Federal Reserve officials said the U.S. central bank was nearing the end of its tightening cycle, the U.S. dollar fell to a two-month low versus a basket of other currencies.
Crude oil costs less for holders of foreign currencies when the dollar is weaker.
U.S. small company confidence hit a seven-month high in June as optimism about the economy improved and sales prospects increased, but inflation worries persisted due to a still-tight labor market.
Markets were looking for hints about the future of interest rates in the U.S. inflation statistics released on Wednesday. Higher rates may impede economic expansion and lower demand for oil.
According to the International Energy Agency (IEA), the second half of 2023 could see further tightness on the oil market due to high demand from China and other emerging nations as well as recently announced production curbs, particularly those by major exporters Saudi Arabia and Russia.
This week, fresh projections from the IEA will be released. Global energy consumption is expected to increase 23% by the end of 2045, according to the secretary general of the Organization of the Petroleum Exporting Countries (OPEC).
RECORD WORLD OIL DEMAND AND SUPPLY
Global oil production is expected to increase from 99.9 million barrels per day (bpd) in 2022 to 101.1 million bpd in 2023 and 102.6 million bpd in 2024, while global demand is expected to increase from 99.4 million bpd in 2022 to 101.2 million bpd in 2023 and 102.8 million bpd in 2024, according to the U.S. Energy Information Administration (EIA).
This contrasts with record-breaking global oil production of 100.5 million bpd in 2018 and record-breaking global liquids consumption of 100.8 million bpd in 2019.
Additionally, according to the EIA, U.S. crude production would increase from 11.9 million barrels per day in 2022 to 12.6 million in 2023 and 12.9 million in 2024, while liquids consumption would increase from 20.3 million barrels per day in 2022 to 20.4 million in 2023 and 20.8 million in 2024.
In contrast, the United States produced a record 12.3 million bpd of oil in 2019 and used a record 20.8 million bpd of liquids in 2005.
The American Petroleum Institute (API), a trade association, and the EIA, an agency, will both provide statistics on U.S. oil inventories on Tuesday and Wednesday, respectively.
The inventory data may have an impact on oil markets since experts surveyed by Reuters expect a 0.5 million barrel rise in U.S. crude stockpiles for the week ending July 7. [EIA/S] [API/S]
If true, it would be the first gain in crude stock in four weeks and compare to an increase of 3.3 million barrels in the same week last year and an average drop of 6.9 million barrels during the previous five years (2018–2022).