Oil edged higher above $89 a barrel as the International Energy Agency became the latest voice to say the market faces a significant deficit in the second half of this year.
(Bloomberg) — Oil edged higher above $89 a barrel as the International Energy Agency became the latest voice to say the market faces a significant deficit in the second half of this year.
West Texas Intermediate added 0.3% after closing Tuesday at the highest since November. US inflation data offered a mixed picture on the outlook for Federal Reserve interest rate policy.
Demand will eclipse supply by 1.2 million barrels a day on average during the second half, the IEA said Wednesday. That comes hot on the heels of a forecast from the Organization of Petroleum Exporting Countries that the fourth quarter may see the biggest deficit in more than a decade.
The numbers reinforce a marked shift in sentiment in recent weeks. Options pricing shows growing demand for bullish call options, and key timespreads are trading in a bullish backwardation, indicating scarce supply.
The bullish outlooks added more impetus to a rally that’s been under way since mid-June as Saudi Arabia and Russia curbed supply, and US and Chinese demand proved relatively resilient. There also have been squeezes in markets for fuels, especially diesel-like products known as distillates.
“The market is really tightening in the second half of the year,” Toril Bosoni, head of the IEA’s oil market division, said in a Bloomberg Television interview. “We’re at risk of seeing continued tightness in the market, especially for distillates, coming into the winter months.”
The industry-funded American Petroleum Institute said nationwide US crude inventories increased by 1.17 million barrels last week, with gasoline and distillate stockpiles also expanding.
However, holdings at the key oil storage hub in Cushing, Oklahoma, declined by 2.42 million barrels. Official data will be published later Wednesday.
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