Oil prices rose for a second day on Tuesday, supported by US plans to refill the Strategic Petroleum Reserves, and severe wildfires in Canada fueled supply concerns.
Weaker-than-expected data pointing to a soft economy failed to push prices down, despite the market focused on higher refinery output by China, the world’s second-largest oil consumer.
Brent crude futures climbed 30 cents, or 0.4%, at 0417 GMT to $75.53 a barrel, and West Texas Intermediate crude (WTI) traded at $71.38 a barrel, up 27 cents, or 0.38%.
Both benchmarks rose more than 1% on Monday, reversing a 3-session losing streak.
The U.S. Department of Energy announced on Monday that it will purchase 3 million barrels of crude for its reserves for delivery in August and has requested that offers be submitted by May 31.
The market was supported by expectations that US oil repurchases for strategic reserve will continue if WTI prices fall near or below $70 per barrel. Investors’ actions of taking advantage of the recent sharp decline sourced by the gains are also supporting the prices.
In April, China’s oil refinery output rose 18.9% from a year ago to the second highest in history, data released on Tuesday showed.
Demand in China continues to show signs of improvement. Transportation data shows that car use and international air travel are on the rise.
Last week, Brent and WTI futures fell for the fourth consecutive time amid fears of a US recession and the risk of a historic default on government debt in early June. The benchmarks had last recorded a similar weekly series of declines in September 2022.
Oil prices on Tuesday have also received support from supply concerns from wildfires in Canada. Widespread fires in Alberta, Canada, have driven more than 30,000 people from their homes and shut down at least 319,000 barrels of oil equivalent per day, or 3.7% of national production.
Global crude oil supply could shrink in the second half of the year as the Organization of the Petroleum Exporting Countries with its allies, including Russia, are planning additional production cuts.
On the other hand, according to data from the Energy Information Administration (EIA), oil production in the seven largest shale oil basins in the US will rise to a record level in June.
Looking ahead, analysts are cautious about the momentum of the current price increase. Too much uncertainty surrounding the macro environment and the absence of any strong signals from the physical market could keep oil prices under pressure.
The global macroeconomic situation and Europe’s energy supply-demand fundamentals will play an important role in determining prices in the second half of 2023.