Oil rose on Friday, consolidating a gain for the week, as macroeconomic trends suggested stronger global demand.
Crude oil has been boosted by signs that China’s use will continue to grow, indications that the U.S. driving season will be robust and expectations that the Federal Reserve’s pause in interest rate hikes will provide the economy a temporary relief. Still, the rally is being limited as inventories continue to rise despite OPEC+ production cuts led by Saudi Arabia.
Production cuts, along with the loss of Russian barrels and wildfires in Canada, have contributed to the tightness of the heavy and sour crude market, but this has been partly offset by ample availability of light and sweet grades of U.S. shale producers, according to Greg Sharenow, chief executive. director of Pacific Investment Management Co. This bifurcation has confused the market, he said.
Adding to this confusion are mixed signals from the physical market. Refinery outages in the United States and Europe threaten to push crude stockpiles even higher in key hubs, including Cushing, Oklahoma, where stocks are already at a two-year high. West Texas Intermediate is down 11% for the year.
“The oil market is very fragile and refinery outages will disrupt the rally that is starting to take place in crude oil prices,” said Ed Moya, senior market analyst at Oanda Corporation.
Prices:
- WTI for July delivery rose $1.66 to settle at $71.78 a barrel in New York.
- Brent for August settlement rose 94 cents to $76.61 a barrel.
