Oil prices rose Wednesday after industry data showed US crude inventories fell more than expected. As land and air transportation improved in Europe and North America, the data on the tightening of the supply-demand balance became stronger.
West Texas Intermediate (WTI) crude futures rose 33 cents, or 0.5%, to $73.18 a barrel at 0217 GMT after falling 60 cents on Tuesday.
Brent crude futures rose 42 cents, or 0.6%, to $75.23 a barrel after falling 9 cents on Tuesday.
Crude inventories fell by 7.2 million barrels in the week ended June 18, according to data from American Petroleum Institute. This was a much larger drop than the 3.9 million barrels some analysts had expected on average.
If the official figures to be released by the US Energy Information Administration later on Wednesday confirm the decline, it will be the fifth week in a row showing the tightening in the US market.
All eyes are on what the Organization of the Petroleum Exporting Countries and its allies plan to do when they meet on 1 July as they measure the recovery in demand. OPEC+ is said to be discussing a gradual increase in supply from August, but no decision on exact volumes has yet been made. The prospect of Iranian oil launching in the near term requires OPEC to be cautious about increasing supply.
OPEC+ appears to have increased production more gradually to maintain the downward pressure on inventories and the upward pressure on prices.
Major US shale producers are increasing their drilling rates, however, producing more slowly than in previous recoveries. The limited response from the US shale sector temporarily removed the threat to OPEC+ and encouraged the group to push for higher prices.
As the market continues to shrink, the producer group is once again faced with a difficult decision. Global progress in COVID-19 vaccine campaigns has sharply increased consumer mobility in the US, China and Europe.
The US dollar’s pullback from a two-month high last weekend helped support oil prices as the weaker dollar made oil cheaper than other currencies.
Oil bulls are betting on OPEC+ and US shale gas. On WTI, the number of bearish open interest fell to a three-year low as several portfolio managers were ready to bet against further price increases.
Hedge funds have rarely risen more on the oil outlook over the past three years, even as prices have risen to levels that have caused strong response from producers in the past.
Fund managers predict oil consumption will grow strongly in the second half of 2021 and the first half of 2022 as vaccination programs allow major economies to reopen and international passenger aviation to resume.
