Demand for crude oil is accelerating – a bullish sign for its prices. What may the current energy market environment say about the black gold’s outlook?

A Chinese panda’s appetite

On the Asian continent, the lifting of health restrictions in China could signal resuming oil demand for the world’s top consumer. Given the context of tight supply, this has partially triggered a rebound in crude while driving prices higher.

Geopolitical scene

The Libyan National Oil Company (NOC) warned that they could declare a state of "force majeure" on the facilities in the Gulf of Sirte – blocked due to the political crisis that has been hitting the country for months.

In Ecuador as well, the spectre of a halt in oil production is becoming clearer following the blockades and demonstrations initiated by a movement protesting the rise in the cost of living.

OPEC+ struggles to increase volumes

The United Arab Emirates assured that they were at maximum capacity, while Saudi Arabia stated it could pump an additional 150,000 barrels per day. It is important to note that these two producing countries are indeed the two OPEC+ members perceived to have the most spare oil production capacity. The 23 members of OPEC+ are just starting a series of two-day e-meetings on Wednesday (they should also meet on Thursday by videoconference) to decide on a new adjustment to their total volume of production of black gold. However, analysts expect the status quo despite numerous calls for action.

Fed’s recession denial?

The US economy is slowing down, but not to the point of falling into recession, the president of the New York branch of the Federal Reserve (Fed) said to CNBC Tuesday. The mighty Federal Reserve has raised rates three times since March. The latter are now in a range between 1.50% and 1.75% after remaining close to zero during the COVID-19 pandemic.

Fundamental analysis

On Tuesday, the American Petroleum Institute (API) released their weekly oil stock figures.

U.S. API weekly crude oil stock

The weekly commercial crude oil reserves in the United States dropped to -3.8M barrels while the forecasted figure was just about -0.110M, according to figures released on Tuesday by the US American Petroleum Institute (API).

fxsoriginal

US crude inventories have thus decreased by over 3.799 million barrels, which firmly shows accelerating demand and could be considered a strong bullish factor for crude oil prices. This figure would indeed signal a rise in fuel consumption. As a result, demand is now holding up well as the peak of the summer driving season approaches with many trips.

fxsoriginal

(Source: Investing.com)

Chart

WTI Crude Oil (CLQ22) Futures (August contract, daily chart)

Chart

RBOB Gasoline (RBQ22) Futures (August contract, daily chart)

Chart

Brent Crude Oil (BRNQ22) Futures (August contract, daily chart) – here it is represented by its Contract for Difference (CFD) UKOIL


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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' employees and associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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