West Texas Intermediate increased 0.6% after ending on Tuesday at a record high. During the second half, demand will outpace supply by an average of 1.2 million barrels per day, the IEA said on Wednesday. This follows the Organisation of Petroleum Exporting Countries’ prediction that the fourth quarter may witness the largest deficit in over ten years. According to the US Energy Information Administration, the deficit will be smaller.
The statistics support a noticeable shift in sentiment over the past few weeks. Key timespreads are trading in a bullish backwardation, indicating limited supply, and options pricing reflects increasing demand for bullish call options.
The positive outlooks gave a rally that had been going since mid-June even more momentum as Saudi Arabia and Russia reduced supplies while US and Chinese demand held up quite well. Markets for fuels have also under pressure, particularly those for distillates, products that resemble diesel.
According to Toril Bosoni, head of the IEA’s oil market section, “the market is really tightening in the second half of the year,” he stated in a Bloomberg Television interview. Coming into the winter, the market could become much more constrained, particularly for distillates.
The nation’s crude inventories rose by 1.17 million barrels last week, according to the industry-funded American Petroleum Institute, and petrol and distillate inventories also rose.
Cushing, Oklahoma, a major oil storage hub, saw a 2.42 million barrel reduction in inventory. Wednesday’s official data will be released later.