Oil Prices Under Pressure Despite Bullish Sentiment

Oil prices are set to end this week flat after gaining around 3% last week amid robust demand and growing supply unease.

This week, these factors were tempered by the prospect of a ceasefire in the Middle East and a stronger U.S. dollar that normally puts oil traders in mind of weaker demand. Profit-taking after last week’s gains also served to dampen prices.

On the other hand, there are indications that global oil inventories are in a stronger-than-usual decline, which might deepen worry about the sufficiency of supply.

Reuters earlier today cited data from consultancy FGE that showed onshore inventories of crude oil and fuels had fallen by 12 million barrels in the first half of the month. This was a much steeper decline than the seasonal average of some 6 million barrels for the period between 2015 and 2019.

“We expect oil markets to remain tight in the short term, while geopolitical risks are also likely to create some bouts of volatility,” a Standard Chartered analyst told Bloomberg.

Supply disruptions in Russia continued to apply upward pressure to prices although in the last two days this was offset by the dollar’s rally. A perception of lower U.S. gasoline demand also helped temper prices, even though inventories of the fuel booked another weekly decline, per the EIA’s latest inventory report.

Meanwhile, sentiment towards oil demand may be about to change more broadly as attendants at the CERAWeek conference raised questions about peak demand forecasts that keep diverging from reality.

Aramco’s chief executive earlier this week called for an end to the rush to phase out oil and gas, substituting it with adequate investment. Vitol’s chief executive Russell Hardy said his company had pushed back its forecast for peak oil demand in light of slowing EV sales growth.

By Irina Slav for Oilprice.com

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