Oil prices extended their climb today to settle at their highest in more than seven years, after a pipeline fire temporarily disrupted crude flows from Iraq to Turkey and the IEA raised its forecast for 2022 demand growth.
"The pattern of recent weeks is being repeated, in other words: news about supply outages pushes prices up significantly, yet prices do not drop back to their previous level once the problems have been resolved," said Carsten Fritsch, analyst at Commerzbank, in a note.
However, after two straight weeks of huge product inventory builds, traders are focused on tonight's API data and tomorrow's official DoE data.
Crude +1.404mm (-700k exp)
Gasoline +3.463mm (+2.4mm exp)
Distillates -1.179mm (-1.1mm exp)
Crude inventories unexpectedly saw a build last week, ending 7 straight weeks of draws...
WTI traded back above its October 2021 swing highs and hovered around $85.50 ahead of the API print and dipped lower after (though well off the intraday high of $86.79...
“The market has already priced in a tighter market in 2022, and the IEA and other agencies are just catching up to that,”said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. Oil could still extend its rally as “event risks in a tight market can cause outsized moves to the upside.”
Oil’s rally, however, poses a challenge for consuming nations and central banks as they try to stave off inflation while supporting global growth.