Oil steadied after a short-lived relief rally as the market digested differing views on the supply and demand outlook, while an industry report pointed to an expansion in US stockpiles.
Global benchmark Brent traded above $82 a barrel, while West Texas Intermediate was close to $78. The International Energy Agency said global oil markets won’t be as tight as expected this quarter, with production growth in the US and Brazil beating forecasts. That came after an assessment from OPEC that highlighted robust growth trends and healthy fundamentals.
The differing views from the two bodies “will likely keep oil markets on edge,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia. He sees Brent averaging $85 a barrel this quarter, falling to $75 by the second quarter of 2024 on demand concerns, “more in line with the IEA’s view of the world, but OPEC+ supply policy will be key.”
The industry-funded American Petroleum Institute reported US crude inventories rose by 1.3 million barrels last week, while stockpiles at the hub in Cushing, Oklahoma increased by 1.1 million barrels, according to people familiar with the data. Figures from AlphaBBL also signaled expansion at Cushing. Two weeks of official data is due later Wednesday.
Oil has fallen sharply since mid-October as the Israel-Hamas war risk premium evaporated and doubts set in about the demand outlook, before rising in the three days through Monday. It’s lacked direction since then, with worries over the health of the global economy balanced by indicators that still show the market is in deficit.
A soft US inflation print on Tuesday spurred bets the Federal Reserve will start cutting interest rates by mid-2024, aiding the longer-term outlook for oil demand and sending the dollar tumbling.
In the Middle East, Israel has begun targeted operations against Hamas, designated a terrorist organization by the US and European Union, at part of the Al-Shifa hospital. Israel said Hamas and other Iran-backed militant groups are using hospitals, including Al-Shifa, as military bases.
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Widely watched timespreads have weakened recently, with the gap between Brent’s two nearest contracts at 24 cents a barrel in the bullish backwardation structure. That compares with $1.55 a barrel a month ago.
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