(Bloomberg) — Oil headed for the first back-to-back weekly gain since early April as a surprise draw in US inventory levels, coupled with signs of robust product demand, signaled buoyant conditions in the world’s top consumer.
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Brent, which was steady above $85 a barrel, has risen more than 3% this week, while WTI traded near $81. Crude stockpiles fell 2.2 million barrels, defying a forecast for an expansion by the American Petroleum Institute. Consumption of products like gasoline, diesel and jet fuel also showed signs of improving.
Other bullish signs include a forecast from the American Automobile Association for a record 71 million Americans to travel over the US Fourth of July holiday period. Metrics for global benchmark Brent are also flashing signs of strength, with the prompt spread in the widest backwardation since April.
“Overall, the EIA data suggests a tightening US oil market,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia, referring to the Energy Information Administration. Still, “over the near term, we think China’s oil demand growth disappointing market expectations is the key downside risk to consider,” he said.
Crude has risen this month, recovering sharply after OPEC+ said that a plan to bring some barrels back to the market was conditional. Banks including Goldman Sachs Group Inc. have said they expect global oil consumption to run ahead of supply, pulling stockpiles lower and supporting prices.
Still, given that crude has risen so quickly in recent sessions, futures are now in overbought territory based on the nine-day relative strength index. That reading indicates a pullback may be imminent.
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