June 21 2024: Oil prices edged slightly higher on Friday, positioning themselves for weekly gains amidst indications of strengthening demand in the United States, the world’s largest oil consumer.
As of 08:20 ET (12:20 GMT), U.S. crude futures were up 0.1% at $81.32 a barrel, while the Brent contract also rose 0.1% to $85.75 a barrel. Both benchmarks are on track to record gains exceeding 3% this week, marking the second consecutive winning week and trading near their highest levels in over seven weeks.
U.S. Crude Stockpiles Decrease
The Energy Information Administration reported on Thursday that U.S. crude stockpiles decreased by 2.5 million barrels in the week ending June 14, surpassing the expected draw of 2.2 million barrels. Additionally, U.S. government data indicated that total product supplied, a measure of the country’s demand, increased by 1.9 million barrels per day (bpd) to 21.1 million bpd.
Despite concerns about economic activity in the U.S. due to the Federal Reserve’s high-interest rates, the four-week average implied gasoline demand has been trending higher as the U.S. summer driving season progresses. However, demand is still slightly below last year’s levels, according to analysts at ING.
Geopolitical Risks Add Support
Geopolitical tensions are also providing support to oil prices. Ukraine’s military reported that its drones struck four oil refineries, radar stations, and other military targets in Russia early on Friday. Concurrently, Israel continues its bombardment of Gaza amid its ongoing conflict with Hamas. Israel’s Foreign Minister Israel Katz has warned of a potential “all out war” with Lebanon’s Hezbollah, whose leader has threatened a full-scale conflict with Israel and also targeted EU member Cyprus for the first time.
A potential confrontation between Israel and Hezbollah raises the risk of a broader conflict in this critical oil-rich region, which could disrupt global supplies.
Strength in the Physical Market
There have been signs of renewed strength in the physical market. The North Sea physical market has shown resilience despite the return of supply from the Buzzard field. OPEC+ production cuts are expected to further tighten the market in the third quarter, suggesting there is still room for prices to rise from current levels, according to ING.
Corporate News: Hess Sale to Chevron Stalled
In corporate news, the $53 billion sale of Hess (NYSE
) to Chevron (NYSE
) faces delays. A contract arbitration panel, which could either block or approve the sale, remains incomplete three months after the case was filed. Reuters reported on Thursday that the third and final arbitrator has not been appointed, potentially delaying a decision until next year.