The situation in the oil market seemed to stabilize when global demand and supply were about to converge, but OPEC+ decided to increase production by 400,000 barrels per day, and the world began to struggle with the delta variant.
Meanwhile, the energy commodity market is in a huge bull market. Coal is getting more expensive, natural gas is getting more expensive (over 110 percent since the beginning of the year), so oil may also face a similar fate if speculators want to join the energy trend. Brent crude was trading around $75.6 a barrel on Thursday, holding at more than two-month highs and extending the previous day's surge after EIA and API data showed a larger-than-expected drop in U.S. crude inventories and the prospect of rising demand for the commodity. The IEA reported on Tuesday that accelerating global vaccine deployment will continue to support oil prices, raising its forecast for global crude demand growth in 2022 by 85,000 bpd to 3.2 million bpd. Meanwhile, US Gulf of Mexico energy companies were able to quickly restore pipeline service and electricity after Hurricane Nicholas passed through the state of Texas.
The oil market appears to be facing a similar problem as the gas market, with inventories falling below historical averages, heightening fears of a crude shortage during the winter season. OECD countries' total inventories fell by 50.3 mb in June to stand at 2,882 mb, 131.2 mb below the 2016-2020 average and 66 mb below the pre-crisis 2015-19 average, according to EIA data.
It seems that a rise in energy commodity prices, including oil prices, ahead of the winter season could lead to a definite inflation in home heating and maintenance costs. Meanwhile, gold, which is often touted as an inflation hedge, fell below $1,800 per ounce. Gold fell Thursday, staying near $1,790 an ounce, as investors appear to still be waiting for a signal on the timing of the Federal Reserve's withdrawal of massive stimulus to the U.S. economy. The FOMC will hold a two-day meeting next week, where clues could be expected as to when the tapering of asset purchases will begin. In the latest data, US industrial production rose in line with forecasts. Import prices fell for the first time in 10 months and the New York Empire State manufacturing index rose more than expected. Investors are now awaiting the release of US unemployment claims data later in the day.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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