Crude oil price fluctuations continued due to recession fears, but on the other hand, positive sentiments were reinforced in the oil market, with US refiners confirming that they are optimistic due to signs of strong demand for fuel.
The positive outlook for crude increased as gasoline and diesel inventories in the United States remained below the five-year average for this time of year, further supporting oil prices.
Oil analysts told Al-Eqtisadiah that with the approaching driving season, fuel demand is expected to remain strong, but economic concerns and China’s slow recovery are keeping oil prices low, pointing to a state of flexibility in fuel demand that may support oil prices and US refining margins.
They reported that although global refining margins have halved since February, with Russian oil supplies continuing to rise and despite the embargo, US refiners are optimistic and most do not see signs of declining demand for fuel.
The specialists pointed out that the “OPEC +” producers alliance is preparing for a new ministerial meeting early next month to review the latest data and market developments and assess the effectiveness of current production levels, stressing that the “OPEC +” alliance will not hesitate to curb production again when needed, to prevent damage to production and investment.
In this context, Hiroyuki Kinoshita, a Japanese analyst and specialist in banking and energy affairs, said that the prospects for global demand for oil are strong, which enhances the balance in the market, especially with the approaching driving season and the annual peak of demand for gasoline, considering that the narrow gasoline and diesel markets are bullish factors for oil prices.
He added that the downward factors are still affecting and remaining in the oil market, as investors and speculators focus on concerns about economic growth and a possible slide in fuel demand, in the event of a complete recession later this year.
Mufid Mandra, Vice President of the Austrian energy company LMF, agrees that the main headline for 2023 is the recovery in demand for jet fuel and gasoline, supported by a stronger summer driving season than previous estimates.
When first-quarter earnings were announced earlier this month, executives at some of the largest US refiners were quoted as saying that refining margins have declined since the last quarter of 2022, but are still higher than historical standards.
As for Andrew Morris, director of the “Bowery” International Consulting Company, he indicates that the oil market continues to pass a period of successive fluctuations and is characterized by some uncertainty, and despite optimistic views on fuel demand in the summer, oil prices have fallen by ten dollars a barrel since mid-April. In the past, this led to erasing the gains made by oil after the “OPEC +” announcement of additional cuts until the end of this year.
The IEA’s assertion highlighted that concerns about the economy and rising interest rates from time to time overshadow signs that supply tightness and market tightening are highly likely later this year.
In turn, Winnie Akilo, an American analyst at the international company, “African Engineering”, said that the oil market was betting widely on China’s economic recovery. The opening was disappointing.
She added that the weak performance in China also coincided with other factors, including the state of uncertainty about the US economy and the global banking system, amid great anticipation of the impact of high interest rates on demand, in addition to new anticipation in the United States’ endeavor to refill the strategic oil reserves.
On the other hand, with regard to prices, oil prices fell yesterday, amid concerns about an abundance of supply, after rising by about 3 percent during the previous session. Brent crude futures fell 24 cents to $76.72 a barrel, and US West Texas Intermediate crude fell 21 cents to $72.62 a barrel.
Both benchmarks rose by about 3 percent yesterday, amid optimism about oil demand and the debt ceiling negotiations in the United States. Oil prices are under pressure, including the unexpected jump in US oil inventories last week due to a new withdrawal from the Strategic Petroleum Reserve.
Inventories increased by five million barrels in the week ending May 12 to 467.6 million barrels, against expectations of a decline of 900,000 barrels in a Reuters poll. Investors are also closely watching developments related to the debt ceiling negotiations in the United States.
Meanwhile, US President Joe Biden and Republican House Speaker Kevin McCarthy confirmed their intention to reach an agreement soon to raise the federal government’s debt ceiling of $31.4 trillion and avoid the government’s failure to pay its obligations, as this would have catastrophic repercussions.
On the other hand, the Organization of Petroleum Exporting Countries (OPEC) withheld its basket prices yesterday due to the public holiday in Austria and Europe.
