Despite an uptick on Friday, oil prices fell for a fourth straight week.
While some of the drop reflects a real slump in demand and boost in supply, some of it looks technical and possibly temporary. There is a good argument prices could rebound over the coming weeks, although some recent economic data isn’t particularly hopeful for oil bulls.
Unused crude oil is filling up storage tanks in Cushing, Okla. Chinese refining margins also have fallen, a sign of soft demand in the world’s largest oil importer.
And both the International Energy Agency and U.S. Energy Information Administration have been lowering their 2024 global oil demand forecasts for months. The EIA now expects a 100,000-barrel-per-day surplus in the oil market next year.
But some of the market’s problems look like they could reverse in the coming weeks.
One reason crude is building up in Cushing storage tanks is that refineries have been doing seasonal maintenance, and refinery capacity is particularly low right now. Several U.S. refineries are expected to be running at fuller strength in the coming days, however.
They will be pulling some of that crude out of storage to process into gasoline and diesel. In fact, diesel inventories are near five-year lows in the U.S., indicating refineries can make money by producing more of it.
The latest oil demand statistics have held up relatively well. U.S. gasoline demand has been rising in recent weeks—perhaps because prices have been falling—and oil use has stayed relatively strong in several other countries.
“Regionally, data were, overall, positive among the countries that reported their oil consumptions statistics this week,” wrote
J.P. Morgan
analyst Prateek Kedia in a note.
The average Wall Street analyst expects
Brent crude
to average $85.50 per barrel in 2024, up from around $80 today.
Some of the pressure on oil prices may be market-driven rather than fundamentals-driven. Overall, oil investors are pessimistic, which may be dragging prices down.
Citigroup
analysts calculate investors are making twice as many short bets on oil than they did at this time last year. Overall, the bull-bear divide is 14% more bearish than it was a year ago.
One catalyst could come later this month when OPEC and its allies meet for a monthly meeting. Prince Abdulaziz bin Salman, the Saudi oil minister, recently told journalists he thinks speculators are behind the latest price drop.
Oil demand isn’t weak, he told reporters in Riyadh last week. “People are pretending it’s weak. It’s all a ploy.”
Write to Avi Salzman at [email protected]
Read the full article here
