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Oil prices reversed losses and edged higher early on Wednesday as analysts expect an increasingly tighter market balance later this year.
As of 7:20 a.m. EDT on Wednesday, ahead of the EIA’s weekly petroleum status report on inventories in the United States, the U.S. benchmark, WTI Crude, was up by 0.41% on the day at $71.11. The international benchmark, Brent Crude, was trading 0.40% higher at $75.16.
Price gains were limited due to continued concerns over the health of the U.S. economy and the patchy recovery in China, where recent macroeconomic data disappointed the market.
Data showed on Tuesday that China’s industrial production rose by 5.6% in April year-over-year, missing the 10.9% annual growth expected by a Reuters survey of economists. Retail sales in China, while jumping by 18.4% in April and accelerating the growth from March, also missed analyst estimates for a 21% surge.
The impasse in the negotiations on the U.S. debt ceiling has also weighed on the oil market this week.
But estimates of continued drawdowns in U.S. fuel inventories were supportive of oil prices, and so was the International Energy Agency’s more upbeat outlook on Chinese oil demand this year.
The American Petroleum Institute (API) estimated on Tuesday that U.S. gasoline inventories fell by 2.46 million barrels in the week to May 12. Distillate inventories declined by 886,000 barrels.
While the most recent macroeconomic data from China fell below expectations, the International Energy Agency (IEA) upgraded on Tuesday its global oil demand growth estimate after finding that the Chinese recovery continues to exceed expectations, and that China’s oil demand hit a record high of 16 million barrels per day (bpd) in March 2023.
The IEA now sees global oil demand rising by 2.2 million bpd to a record 102 million bpd this year, as it revised up its forecast by 200,000 bpd from last month’s report. The decline in oil prices over the past few weeks contrasts with an expected tightening of the market later this year when demand is set to exceed supply by nearly 2 million bpd, the IEA said on Tuesday.
