By Gleb Baranov
On Wednesday, oil prices overcame resistance at the level of the peaks of April, reaching the highs for Brent since January, and for WTI since November. Fears of sluggish demand from China and rising inventories in the United States could not overcome the decline in supplies by Saudi Arabia and Russia.
Yesterday, October futures for North Sea Brent blend, having added 1.7% during the day, reached $87.65 per barrel. West Texas WTI for September delivery jumped 2.1% to hit $84.65. Thus, they broke through resistance at the level of April highs, which oil reached after the sudden decision of the OPEC+ countries to cut production.
As a result, Brent reached its maximum since January, less than a dollar and a half short of the peak of the year, and WTI has already reached levels not seen since November. At night, Moscow time, they slightly corrected, but so far they have remained above the record levels of April. And there is a chance that they will continue to move up.
“The fact that WTI broke the April high of $83.5, recorded after the OPEC+ decision, means that people who were bearish or skeptical of the efforts of this group of countries turned out to be wrong,” City Index analyst told Bloomberg yesterday. Fawad Razakzada. “Oil prices should continue to rise until there are serious demand problems.”
The overcoming of resistance to quotes was only barely noticeably prevented by talks about the threat of a reduction in demand from China. They resumed after the publication of data that the consumer price index there fell in July by 0.3% year on year. This did not come as a negative surprise (analysts polled by Reuters expected a decline of 0.4%), but it nevertheless generated a flow of eloquence from interested commentators.
They agreed to the point that China would enter an era that would be akin to Japan's "lost decades". But although the PRC certainly has its own difficulties, and the Chinese and Japanese may seem similar to Europeans, these comparisons do not say anything but an inflamed imagination. Japan in the late eighties and modern China are very different stories.
The facts show that China's oil imports grew in the first half of the year. And the GDP of this country in the II quarter grew by 6.3% after growth by 4.5% in the first. Analysts, however, expected 7.3%, and, comparing their forecast with the fact, they shouted about the slowdown - but these are analysts' problems, not China's.
According to the official forecast, China's GDP growth will be about 5% in 2023. And Saudi Aramco, for example, recently predicted continued growth in Chinese demand for oil in the second half of the year.
Markets also largely ignored a higher-than-expected increase in U.S. crude inventories of 5.85 million barrels. Such an increase is not surprising against the backdrop of a record drop a week earlier. So much more attention was drawn to fuel inventories, which showed the largest decline in three months.
Inventories of gasoline in the US fell by 2.7 million barrels, and distillates - by 1.7 million. Meanwhile, they were expected to remain virtually unchanged.
“The whole narrative about concern about demand is completely out of place today, as long as oil inventories are low,” Giovanni Staunovo, an analyst at UBS Group, was quoted yesterday by Bloomberg. “It's more of a story about the tension in the market that drives oil prices. Technical factors also support them after the quotes broke through the April highs.
Strong resistance, indeed, as technical analysts are accustomed to believe, after breaking it turns into no less serious support. But in this story, both technical and fundamental factors converged. And that is why last week was the sixth in a row closed with oil quotes in plus.
Global oil demand, according to Goldman Sachs, reached a record 102.8 million b/d in July and will continue to grow in the second half of the year. But the main reason was the reduction in oil supplies to the world market by OPEC+ countries.
"The latest recovery is mainly driven by the promise of major producers such as Saudi Arabia and Russia to keep supply low for another month," Haralampos Pissouros, senior investment analyst at brokerage XM, told Reuters yesterday.
This article originally appeared at expert.ru