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Oil Price Rally Ends Along With Peak Of Summer Driving Season

Oil prices ended their rally on Monday, falling nearly 1% as market sentiment weighs concerns of falling demand now that the peak of the summer driving season is behind us. 

At 12:10 p.m. ET on Monday, Brent crude was trading at $85.53, down 0.92% for a 79-cent loss on the day. West Texas Intermediate (WTI) was trading at $82.01, down 0.98% for an 81-cent loss on the day. 

The drop comes after six straight weeks of gains for both Brent and WTI. 

At the beginning of the summer driving season, optimism was running high with rising retail prices, declines in inventories and higher refinery runs. 

The natural end to the peak of the summer driving season is now weighing on the market, with lower demand for gasoline set to lead to lower demand for crude oil. In June, the International Energy Agency (IEA) warned in its medium-term oil market report that global oil demand would rise by 6% between 2022 and 2028, reaching 105.7 million barrels per day, “supported by robust demand from the petrochemical and aviation sectors”. 

However, the IEA also noted that “despite this cumulative increase, annual demand growth is expected to shrivel from 2.4 mb/d this year to just 0.4 mb/d in 2028, putting a peak in demand in sight.”The use of oil for transport fuels is also set to decline after 2026 due to the expansion of the electric vehicle market. A prolonged end to the oil price rally should balance out fears of tighter supply due to Saudi Arabia’s oil output restrictions and news that OPEC production dropped by more than 1 million barrels per day in July. 

By Charles Kennedy for Oilprice.com

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  • George Doolittle on August 08 2023 said:
    Massive natural gas supplies might be starting to weigh on market for fuels for the USA along with of course "peak exports" given the surge in US exports of both piped gas and liquified natural gas plus exports of propane as well.

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