Crude oil prices exhibited signs of weakness in Thursday’s trading due to an unexpected increase in weekly crude oil inventories. Despite this, prices have risen by 3% for the week following three consecutive weekly declines. The West Texas Intermediate (WTI) crude held onto support at $78 during Asian trading hours, retreating from a three-week high of $79.12 reached on Wednesday. U.S. crude stocks surprised analysts with a build of 3.7 million barrels, reaching a total of 459.7 million barrels. Gasoline stocks also rose more than anticipated, increasing by 2.6 million barrels to 233.5 million barrels, while U.S. gasoline demand surged to 9 million barrels per day (mbpd) last week.
The Energy Information Administration (EIA) adjusted its 2024 demand forecast upwards by 1.1 mbpd in May, compared to 0.9 mbpd in April. Non-OPEC+ supply is expected to grow by 1.2 mbpd in 2024, averaging 53.0 mbpd, driven primarily by U.S. liquids supply growth. Global oil inventories decreased by an estimated 0.3 million barrels per day (b/d) in the first half of 2024, with a further average decline of 0.6 million b/d expected from the third quarter of 2024 through the first quarter of 2025. U.S. crude oil production is projected to increase by 2% in 2024, averaging 13.2 million barrels per day (b/d) for the year, with an additional 4% growth anticipated in 2025.
Total OPEC-12 crude oil production averaged 26.63 mbpd in May 2024, up by 29,000 b/d month-on-month (M-o-M), while total OPEC+ output fell by 123,000 b/d to 40.92 mbpd. Non-OPEC+ members’ crude oil production averaged 14.29 mbpd in May 2024, a decrease of 152,000 b/d M-o-M. The global oil demand growth forecast for 2024 remains unchanged from last month’s estimates at 2.2 mbpd, totaling 104.5 mbpd. Global oil demand is expected to grow by an average of 2.3 mbpd year-on-year (Y-o-Y) in the second half of 2024, driven by strong demand for air travel and robust road mobility, including trucking. Additionally, industrial, construction, and agricultural activities in non-OECD countries are expected to support demand. Non-OECD oil demand is forecast to grow by an average of 2.1 mbpd Y-o-Y in the second half of 2024, with China and India being the primary drivers.
China’s crude imports improved on a monthly basis in May to 11.06 million barrels per day (bpd), up from an average of 10.88 million bpd in April, indicating increased demand. However, the May average was below the 12.11 million bpd average for May 2023, and the first five months’ imports were down by 130,000 bpd compared to the previous year.
The decline in energy prices since April is reflected in May’s Consumer Price Index (CPI) reading, with inflation remaining flat following a 0.3% increase in April and advancing Y-o-Y to 3.3% from 3.4% in April. The monthly core CPI rose by 0.2%, with a 12-month increase of 3.4%. This easing of inflation raises the likelihood of a September rate cut, though U.S. Federal Reserve Chairman Jerome Powell emphasized the need for more data to regain confidence that inflation will sustainably return to 2%. The Federal Open Market Committee (FOMC) left policy rates unchanged for the seventh straight meeting, with the federal funds target range at 5.25% to 5.50%.
In the short term, crude oil prices are expected to remain range-bound between $77 and $80. While China continues to grapple with its property market issues, which may delay economic recovery, the supply side remains abundant. Total OECD commercial oil stocks in May increased by 16.6 million barrels M-o-M to 2,773 million barrels, indicating shrinking demand. However, the next three months could see strong summer demand from northern hemisphere countries, potentially pushing medium-term WTI prices to test the resistance level of $82.
