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WTI rises after breaking three-week losing streak
US crude oil rose more than 2% on Monday to reach $80 per barrel, adding to last week’s gains.
West Texas Intermediate rose nearly 4% last week, snapping a three-week slide and its best weekly performance since early April. Oil prices are rising on expectations that summer fuel demand will deplete stocks and tighten the market in the third quarter.
But Bob Yawger, executive director of energy futures at Mizuho Securities, said the rally is largely due to short covering by speculators and “could evaporate at any time.”
Yawger said data from China, the world’s biggest crude oil importer, and summer season gasoline demand need to improve dramatically for economic fundamentals to support the move higher.
Here are Monday’s closing energy prices
- West Texas Intermediate July contract: US$80.33 per barrel, up US$1.88, or 2.4%. Year to date, US oil has gained 12.1%.
- Brent August contract: US$84.25 per barrel, up US$1.63, or 1.97%. Year to date, the global benchmark index is ahead by 9.3%.
- RBOB gasoline July contract: US$2.44 per gallon, up 1.97%. Year to date, gasoline rose 16.3%.
- Natural gas July contract: US$2.78 per thousand cubic feet, down 3.23%. Year to date, gas gained 10.9%
China released mixed economic data on Monday, with retail sales in the world’s second-largest economy exceeding expectations but industrial production and fixed asset investment missed forecasts.
Uncertainty about China’s economy and growing oil demand has long hung over the market. OPEC expects the Chinese economy to grow 4.8% this year, acting as the main driver of crude oil consumption in the developing world.
The Paris-based International Energy Agency, however, revised its outlook for global oil demand downwards, citing weakness in China. Demand growth in China slowed from 800,000 barrels per day in the first quarter to 95,000 barrels per day in April, according to the IEA.
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WTI x Brent.
As a result, global oil demand growth will be 960,000 barrels per day this year, about 100,000 barrels per day lower than previously forecast, according to the agency.
Tamas Varga, an analyst at oil brokerage PVM, said last week’s rally was “not entirely convincing; however, developments over the last five trading sessions also did not indicate any souring in investor sentiment.”
Oil inventories are expected to fall by 850,000 barrels a day in the third quarter, said Helima Croft, head of global commodities strategy at RBC Capital Markets.
“It’s more of a sense that this market is probably going to get tighter as we go into the summer,” Croft told the CNBC program “Closing bell: Extra time” on Friday.