Oil futures edged lower on Thursday after fresh gains in the U.S. amid bullish weekly data on both supplies and production.
The Energy Information Administration said U.S. crude stockpiles fell a bigger-than-expected 7.2 million barrels last week, the fourth-straight drop. Supplies of gasoline and distillates also fell while output abated slightly.
All this points to strong demand growth as refineries are eager to capture still-healthy margins, said analysts.
“Is it possible we’ve maxed out? There is that possibility,” said Bob Yawger, director of the futures division at Mizuho Securities USA, joining a growing group of analysts who believe there is not much room left for U.S. production to grow for now because of the oil-patch capital-spending slump seen in 2015 and 2016 as prices crashed.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU7, -0.18% recently traded down 9 cents at $48.66 a barrel in the Globex electronic session. September Brent crude LCOU7, -0.20% on London’s ICE Futures exchange eased 10 cents to $50.87.
Through Wednesday’s settlement, oil prices jumped more than 6% this week as investors have started to come around to the idea that output-curtailment efforts by the Organization of the Petroleum Exporting Countries and other major producers may be starting to show results. That as recent data have shown increasing levels of long positions amid oil speculators.
As the U.S. shale boom of the past several years resulted in sharp oil-output growth from America, those in the Middle East and Russia boosted their own production to defend their market share. That ultimately resulted in oil hitting its worst levels since the mid-2000s at the start of 2016.
But the tide is slowly turning, say some, contending that prolonged low prices may have started to weed out high-cost producers and investors in the U.S.
At the same time, OPEC’s production-curtailment initiative is also seeing gradual signs of success. That as Saudi Arabia announced Monday it will decrease August exports, a moved emulated by Kuwait.
Meanwhile, global oil demand is rising on a steady pace, mostly due to the ferocious appetite in China, India and other emerging countries in Asia.
Still, traders are still treading lightly and mindful that last week’s hefty inventory decline may not be sustainable.
Crude demand by U.S. refiners will likely recede in September and October when seasonal maintenance work begins, Societe Generale noted. Meanwhile, long-term Chinese oil demand is expected to lose some steam as the country veers towards green energy and natural gas to power its massive population, said BMI Research.
Among products, Nymex September diesel rose 0.2% to $1.6023 a gallon, reformulated gasoline blendstock RBQ7, -0.16% was flat at $1.5940 and August ICE gasoil rose 0.8% to $474 per metric ton.