On constrained supply, oil rises 1%, with US crude hitting a 13-week high

On constrained supply, oil rises 1%, with US crude hitting a 13-week high

On Tuesday, oil prices rose by around 1%, with U.S. crude settling at a 13-week high due to supply concerns, including the likelihood of no nuclear deal with Iran and forecasts for demand growth in China, which is reducing pandemic lockdowns. According to Reuters polled analysts, U.S. crude inventories decreased last week. A decline in petroleum stockpiles might boost prices further more.

On Tuesday, at 4:30 p.m. EDT (2030 GMT), the American Petroleum Institute (API) will release its inventory report. On Wednesday at 10:30 a.m. EDT (1430 GMT), the US Energy Information Administration (EIA) releases its report.

“Several numbers” in the EIA report, according to Robert Yawger, executive director of energy futures at Mizuho, are “within striking distance of historical lows,” including possibly crude storage for the country, crude storage at Cushing, Oklahoma, and crude storage in the Strategic Petroleum Reserve.

Brent crude futures rose $1.06, or 0.9 percent, to $120.57 per barrel, the highest level since May 31. WTI crude in the United States rose 91 cents, or 0.8 percent, to $119.41, its highest settlement since March 8 and matching an August 2008 settlement high.

Iran’s demands for sanctions relief, according to the US, are impeding progress on reviving the 2015 nuclear deal. According to analysts, a deal might increase global oil supplies by 1 million barrels per day. In 2022, the US EIA predicts that both crude production and petroleum demand will increase in the United States.

Expectations that demand will resume in China, where the capital Beijing and the business hub Shanghai have started resuming normalcy after two months of lockdowns, boosted prices. Analysts also questioned that global oil supplies would grow significantly as a result of OPEC+’s decision to accelerate output increases last week. According to analysts, the rise in quotas from OPEC+, the Organization of Petroleum Exporting Countries (OPEC) and allied producers including Russia, is less than the loss of Russian crude as a result of Western sanctions, and it also fails to alleviate an oil product deficit.

Oil prices could touch $150 a barrel shortly and continue higher this year, according to Trafigura’s CEO, with demand destruction probable by the end of the year. For the period between the second half of 2022 and the first half of following year, Goldman Sachs boosted its Brent oil price projections by $10 to $135 a barrel, citing an unsolved structural supply shortage.

In other supply concerns, Libya’s Sharara oilfield was shut down again late Monday, and more than a tenth of Norway’s offshore oil and gas workers intend to strike starting Sunday if state-mediated pay negotiations fail.