On Wednesday, oil prices experienced a 2% hike, driven by positive expectations regarding oil demand and ongoing U.S. debt ceiling negotiations. These factors effectively offset the prevailing supply concerns. Brent crude futures witnessed a $1.48 rise, amounting to a 2% increase, to reach $76.39 a barrel by 11:56 a.m. EDT (1656 GMT). Concurrently, West Texas Intermediate U.S. crude experienced a 2.1% rise, amounting to $1.50 and settling at $72.36.
IEA Predicts Demand Overcoming Supply in H2 2023
On Tuesday, the International Energy Agency (IEA) predicted that demand would outstrip supply by 2 million barrels per day (bpd) in the latter half of the year. Significantly, China will contribute 60% of oil demand growth in 2023. Bob Yawger, director of energy futures at Mizuho, remarked that the IEA's assessment had infused optimism into the market.
U.S. Debt Ceiling Talks Influence Market Confidence
The market has been closely monitoring debt ceiling negotiations, with participants drawing confidence from Kevin McCarthy, the Republican House of Representatives Speaker's commitment to preventing a potentially disastrous default. As the Energy Information Administration reported, this positivity effectively counterbalanced the impact of a crude inventory increase of 5 million barrels for the week ending May 12.
U.S. Growth Concerns Amid Inventory Build and Retail Sales
Despite the optimism, the crude inventory build has sparked worries about U.S. growth. This comes after data showed retail sales in April increasing by only 0.4%, falling short of the 0.8% estimate. In contrast, gasoline stocks saw a decline of 1.4 million barrels as the four-week gasoline product supply, which represents demand, reached its highest level since December 2021.
Chinese Economic Indicators Influence Oil Market Sentiment
In China, industrial output and retail sales growth in April failed to meet forecasts, indicating a loss of economic momentum at the start of the second quarter. Vandana Hari, the founder of oil market analysis provider Vanda Insights, commented that markets are closely observing the outcome of crucial negotiations to raise the U.S. government's debt ceiling. The release of several macroeconomic data points for April confirmed a slow and uneven recovery in China, which continues to influence oil market sentiment.