The benchmark crude WTI (CM:CL) rallied by nearly 3.6% over the past week as supply concerns weighed on traders’ minds. Rising output from OPEC+ and weak demand from China, however, threaten to cap these gains.
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Tight U.S. Supply
The latest numbers from the Energy Information Administration (EIA) indicated a significant decrease of 12.6 million barrels in U.S. crude inventories for the week ended June 28. In comparison, the Street had anticipated a decline of just 400,000 barrels for the period. Similarly, data from the American Petroleum Institute (API) pointed to a decrease of 9.16 million barrels in U.S. commercial stockpiles for the same week. These declines suggest strong U.S. energy exports and robust summer travel demand.
Overall, oil prices have rallied by nearly 12.4% over the past month, and analysts largely anticipate further gains for oil throughout the remainder of 2024. However, production levels from OPEC+ and demand from China remain key factors to monitor.
The OPEC+ Factor
According to Reuters, oil production by OPEC+ increased for the second consecutive month in June. The higher output was largely driven by increased production from Nigeria and Iran. This increase in production comes despite OPEC+ deciding to maintain its output limits until the end of next year.
Economic Picture in China
Additionally, a not-so-promising economic outlook in China could weigh on demand for oil. According to Reuters, services activity growth in China is now at its lowest pace in nearly eight months. China is one of the largest energy consumers globally, and a weak demand scenario in the country could potentially impact oil prices.
Is the Price of Oil Expected to Go Up?
Meanwhile, the TipRanks Technical Analysis tool is flashing a Strong Buy signal for oil on a monthly time frame. This indicates that the bullish price action in oil could continue over the coming periods.
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