Oil nears $80 as US summer driving season approaches
Singapore — Oil prices firmed on Thursday, with Brent crude creeping ever closer to $80 a barrel, a level it has not seen since November 2014, as supplies tighten while demand remains strong.
Brent crude futures were at $79.36 a barrel at 4.51am GMT, up 8c from their last close.
US West Texas Intermediate (WTI) crude futures were at $71.71 a barrel, up 22c or 0.3% from their last settlement.
ANZ bank said on Thursday that Brent was "now threatening to break through $80 a barrel … (as) geopolitical risks continue to support prices, (and) an unexpected fall in inventories in the US got investors excited yesterday".
US crude inventories dropped by 1.4-million barrels in the week to May 11, to 432.34-million barrels.
ANZ said the falling US inventories were "raising concern [about] tight markets heading into the US driving season", during which demand typically rises.
With the dollar strengthening, higher oil prices and softening economic growth, we see a threat to demand growth from 2019.BMI Research
Looking beyond seasonal changes, US bank Morgan Stanley said it had raised its Brent price forecast to $90 a barrel by 2020, due to a steady increase in demand.
Not all indicators pointed to a tighter market, however.
"A weakening dollar, strong economic growth and low oil price have all supported a tremendous recovery in oil demand over the last few years, clearing the oversupply in the market," BMI Research said on Thursday.
"With the dollar strengthening, higher oil prices and softening economic growth, we see a threat to demand growth from 2019."
The International Energy Agency (IEA) said on Wednesday that it had lowered its global oil demand growth forecast for 2018 from 1.5-million barrels a day to 1.4-million barrels a day.
The IEA said global oil demand would average 99.2-million barrels a day in 2018.
Although supplies currently stand at only 98-million barrels a day due to supply cuts led by the Organisation of the Petroleum Exporting Countries (Opec), the IEA pointed to "strong non-Opec growth", which it put at 1.87-million barrels a day in 2018.
Leading production increases is the US, where crude output has soared by 27% in the last two years, to a record 10.72-million barrels a day.
That puts the US within reach of top producer Russia, which pumps about 11-million barrels a day.
As a result of its surging production, US crude is increasingly appearing on global markets.
Commodity brokerage Marex Spectron said the surge in US supplies was a "strongly price-bearish development".
It said the economic outlook was also "firmly bearish" as "short-term credit conditions have worsened which … hasn’t been priced correctly by the market".
The brokerage also said US energy intensity "continues to decrease which is never good news for the future consumption of oil".