Oil posted its longest streak of gains since mid-2022 as multiple reports forecasting increased demand gave a fresh boost to a rally built on increased supply-disruption risks and extended Saudi production cuts.
(Bloomberg) — Oil posted its longest streak of gains since mid-2022 as multiple reports forecasting increased demand gave a fresh boost to a rally built on increased supply-disruption risks and extended Saudi production cuts.
Among the bullish projections was a monthly IEA report on Friday that said world oil demand surged to a record in June and may soar even higher in August amid robust Chinese consumption. An OPEC monthly report on Thursday forecast markets will experience a sharp supply deficit of more than 2 million barrels a day this quarter.
Meanwhile, the supply concerns that have driven oil’s rally since late June have yet to abate. Traders are closely watching the potential disruption of Russian exports in the Black Sea after recent escalations in the war with Ukraine. On Tuesday, OPEC leader Saudi Arabia reaffirmed its commitment to voluntarily curb supplies next month.
West Texas Intermediate rose to settle above $83, cementing a seven-week stretch of gains that is its longest since June 2022. Futures reached the highest intraday level since November on Thursday.
Oil has rallied since late June on cuts from Saudi Arabia, aided by export curbs from OPEC+ ally Russia. Traders are also continuing to monitor the wider economic outlook, as the impact of the Federal Reserve’s aggressive rate-hiking cycle continues to ripple through markets, but JPMorgan Chase & Co. said Friday that prices could reach $90 by September.
“We believe prices will continue to climb from here towards $90,” analysts including Natasha Kaneva wrote in a note, referring to the Brent benchmark. “Key market gauges are pointing to a rapidly tightening physical market.”
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In the first step of an emerging deal between Washington and Tehran, Iran has moved four US citizens from prison to house arrest. The deal could eventually lead to more barrels from the OPEC producer hitting the market. Yet on Friday, National Security spokesperson John Kirby said that the two countries weren’t holding active negotiations on the the nuclear program.
The tightness is flowing through to downstream fuel markets, with a type of petroleum left over from oil refining costing more than crude in Europe for the first time in decades. Prices of gasoline and diesel are also well above seasonal norms, partly as a result of refinery output curbs.
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