Crude oil edges higher; rebounding after small drop in U.S. stockpiles
Investing.com | Author Peter Nurse
Published Jul 20, 2023 09:11AM ET
Investing.com -- Crude oil prices edged higher Thursday, rebounding after recent losses, but the tone remains cautious following a lower-than-expected drop in U.S. crude inventories and a sluggish Chinese demand outlook.
By 09:00 ET (13.00 GMT), the U.S. crude futures traded 0.6% higher at $75.71 a barrel, while the Brent contract climbed 0.4% to $79.80.
U.S. inventories disappoint/h2
The crude market fell during the previous session after U.S. inventories fell less than expected, with data from the Energy Information Administration pointing to a drop of 708,000 barrels in the week to July 14, much lower than expectations for a 2.44 million barrel draw.
This came after a bigger-than-expected build in crude stockpiles in the prior week, and raised questions about the sustainability of U.S. demand given these figures are occurring during the normally busy summer driving season.
Slow Chinese recovery weighs/h2
Both benchmarks are on course to record weekly losses of around 2% as traders assess a slower-than-expected Chinese economic recovery following its end to COVID-19 curbs.
China is the largest importer of crude in the world, and was expected to drive much of the recovery in global demand given the aggressive monetary tightening many of the major Western central banks were pursuing in an attempt to curb elevated inflation levels.
Bank of America, earlier Thursday, cut its forecast for China's economic growth this year to 5.1%, from 5.7% previously, citing disappointing second-quarter gross domestic product growth.
EIA expects higher crude prices this year/h2
That said, there still remains a great deal of confidence that China’s economy will recover, probably with the aid of more stimulus from Beijing, helping crude prices push higher in the second half of the year.
Both the Organization of Petroleum Exporting Countries and the International Energy Agency sounded optimistic in their recent monthly reports, while the Energy Information Administration said on Wednesday that crude prices are likely to increase in the second half of 2023 and into 2024.
The EIA sees Brent reaching the “mid-$80 per barrel range” by end-2024, with WTI set to follow a similar path but at a $5 discount to Brent.
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