Oil maintained the bulk of its two-day gains that took US crude to its highest close since November, as traders assess signs of tightening global market conditions as they await the monthly outlook from OPEC.
West Texas Intermediate settled above $83 a barrel, after rising by 4.4% over the previous two days. The gains were driven by another drop in crude inventories at the main storage hub in Cushing, Oklahoma, and signs of weaker Russian oil exports, and disruptions to pipeline supplies from Iraqi Kurdistan.
The Organization of the Petroleum Exporting Countries (OPEC) will release its monthly report later on Thursday, providing fresh insight into market balances through 2023 after the group and its allies, including Russia, announced a surprise production cut earlier this month. Fatih Birol, head of the International Energy Agency, said on Wednesday that demand is likely to outpace supply in the second half.
Crude Oil has rebounded strongly since hitting a 15-month low in March, with widely watched spreads pointing to tight market conditions. Oil's quick recovery was also supported by lower inflation in the US, which will likely enable the Federal Reserve to pause its campaign to raise interest rates.
“Supply concerns continue to support prices after reports of falling Russian shipments, OPEC production cuts and falling US inventories,” said Charu Chanana, market analyst at Saxo Capital Markets Pte. He added: Concerns related to the demand side also receded yesterday, as the US Consumer Price Index report indicates that the interest rate increase in May may be the last in the series of monetary tightening by the Fed, with the continued growth of signs of declining inflation.
The WTI spot spread - the difference between the two nearest contracts - has reversed into a backorder pattern this month, which is a pattern that supports the upside. As for the spot difference for Brent crude, the international benchmark, between December 2023 and the same month next year, it approached $6 per barrel in the case of Backorder as well, up from about $4 per barrel a month ago.
