Oil prices end at highest since late April, bolstered by weaker U.S. dollar, production cuts

Still, the IEA said “persistent macroeconomic headwinds, apparent in a deepening manufacturing slump” led it to revise its 2023 demand growth estimate lower for the first time this year, by 220,000 barrels a day. Next year, it sees oil demand growth slowing to 1.1 million barrels a day.

The IEA sees the economic outlook for wealthy countries looking “‘especially heavy’ — something hinted at by Chinese export data released overnight,” said Matt Smith, lead oil analyst for the Americas at Kpler. Chinese export data, the total exports of all goods, was “very poor, showing them dropping the most since early 2020, down 12% [year on year] — a sign of a slowing global economy.”

In a separately monthly report also released Thursday, the Organization of the Petroleum Exporting Countries said it expects oil demand of 102 million barrels a day this year, with demand growth at 2.4 million barrels a day — up 100,000 barrels from last month’s estimate due to higher demand from China in the second quarter of this year. For 2024, it sees year-on-year demand growth of 2.2 million barrels a day.

See: Saudi Arabia to Lose Top Spot in OPEC+ as Production Cuts Take Effect

Market drivers

Oil prices have risen this week as smaller-than-expected increases in U.S. consumer and producer prices, and lower Treasury yields, resulted in a sharp fall in the U.S. dollar, helping to boost prices of commodities that are priced in the U.S. currency.

A popular gauge of the U.S. dollar’s value against a basket of rivals sunk to its lowest level in more than a year on Thursday. The ICE U.S. Dollar Index
DXY,
+0.19%
fell 0.7% to 99.788.

Although the Energy Information Administration reported a weekly gain in U.S. commercial crude inventories of 5.9 million barrels on Wednesday, recent OPEC+ supply cuts coupled with falling Russian exports have also helped to support global prices, leading UBS Group to recommend investors stay long oil prices.

“With less supply from OPEC+ during the demand-heavy summer months, we expect larger oil inventory declines to become visible and support oil prices,” said Giovanni Staunovo, a commodity analyst at the Swiss bank.

Meanwhile, Phil Flynn, senior market analyst at The Price Futures Group, pointed out that news reports show that Russian oil prices have risen above the Group of Seven nations’ price cap of $60 a barrel “in a tightening global market.”

“While some are downplaying the immediate impact of the price cap right now, we already know the ending of this movie,” said Flynn. “Show me a price cap, and eventually I will show you a shortage.” 

See Oil supplies are set to tighten, but concern over weak demand growth limits price gains: EIA

Meanwhile, natural-gas futures headed lower after the EIA reported on Thursday that U.S. natural-gas supplies in storage rose by 49 billion cubic feet for the week ended July 7.

Analysts had called for a storage increase of 54 billion cubic feet on average, according to a survey conducted by S&P Global Commodity Insights. The data, however, included an upward revision to previously reported stocks for the week ended June 30, with the EIA revising the stock total for that week to 2.881 trillion cubic feet, up from 2.877 trillion.