Yesterday, oil prices climbed for a third consecutive day as key market indicators suggested stronger demand, prompting traders to reassess the outlook for interest rates.
Brent crude approached $86 a barrel, while West Texas Intermediate (WTI) surpassed $83. Recent surges in timespreads, which measure market health, indicated tighter supplies, with WTI’s prompt spread reaching its highest level since October.
Earlier in the week, data showed U.S. inflation had eased, but producer prices rose slightly more than expected on Friday, complicating predictions for U.S. Federal Reserve interest rate cuts. This followed reports of declining inventories at the Cushing, Oklahoma storage hub and a drop in U.S. crude stockpiles.
Oil’s upward trend is supported by OPEC+ supply curbs, with vessel-tracking data revealing a significant drop in Russian exports. However, caution remains after the International Energy Agency warned about potential demand issues due to China’s economic slowdown.
Tamas Varga, an analyst at brokerage PVM suggested that spreads suggest that refinery appetite, a possible indicator of seasonal growth in consumption in the Northern Hemisphere, is increasing and the recent downside correction is evidently over, although the speed of further ascent might be hindered by falling Chinese crude oil imports.
Additionally, summer presents further risks to supply. In Canada, wildfires have erupted around Fort McMurray, the country’s unofficial oil-sands capital, with some production already curtailed by a separate blaze to the northeast.
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