Oil creeps up as markets tighten before double dose of US data

Oil edged higher for a fourth day as shipments from key Libyan ports were suspended, the latest factor compounding market tightness. 

West Texas Intermediate edged above $113 a barrel after gaining over the previous three sessions. Libya’s state oil company has suspended shipments from two key eastern ports amid renewed disruption in the country. Output in Ecuador has also been lower due to ongoing protests. Both disruptions come as Shell Plc said spare energy production capacity is running very low.

Wednesday will also see an unusual US inventory data release, with two weeks being published simultaneously after an outage caused by a power issue. 

While oil has been supported by renewed supply disruptions, subsidies are helping the demand side of the equation. China said it will offer subsidies to refiners and won’t raise domestic prices if international crude rises above $130 a barrel. Still, the world’s largest crude importer doubled down on the nation’s Covid Zero strategy, raising concerns about the outlook for demand. 

Oil is heading for the first monthly decline since November after being hit by fears of a global economic slowdown, but prices are still up about 50 per cent this year. Time-spreads that help gauge market health are also flashing bullish signs, while a price marker for Middle Eastern barrels has surged to a record.

“Recession fears are just that – fears,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd. “In the meantime, oil fundamentals remain solid.”

Prices

  • WTI for August delivery rose 1.2 per cent to $113.05 a barrel at 12:39 p.m. in London.
  • Brent for August settlement climbed 0.9 per cent to $119.07 a barrel.

Global oil markets have tightened after a rebound in economic activity, with Russia’s invasion of Ukraine exacerbating the squeeze by upending trade flows. OPEC+ is expected to rubber-stamp another modest supply increase for August this week, although the cartel has struggled to meet its targets this year.

Before the EIA’s data release, industry data showed US crude stockpiles fell further at the key storage hub of Cushing another signal of tightness in real-world supplies.

© 2022 Bloomberg L.P.

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