Oil prices rise on record gasoline demand, BP pegs oil at $45 to $55 in 2018

Oil prices up as refiners run at high rate, BP expects 2018 oil prices to range from $45 to $55- basically no change

Oil prices rose in seesaw trading on Wednesday on soaring demand for refined product and despite disappointing crude stocks data from the US Energy Information Administration.

Brent crude futures were up 42 cents to $52.20/barrel by 1:o7 p.m. EDT and US WTI was up to $49.45/barrel.

According to the US EIA, crude inventories were down by 1.5 million barrels in the week ending July 28, lower than analysts’ expectations of 3 million barrels.

EIA data showed gasoline demand hit a record high of 9.842 million barrels last week.  Refinery crude runs rose by 123,000 barrels per day (b/d), according to EIA data.

“I would expect the bulls to re-assert control over the market after the initial knee-jerk lower,” David Thompson, executive vice president at Powerhouse told Reuters.

“Refiners continue to run at a high rate to capture strong crack spread margins and this will continue to underpin demand for crude.”

According to Petromatrix strategist Olivier Jakob, the price recovery is due to technical trading, more than outright fundamentals.  As such, traders and investors were encouraged to buy crude futures.

“There are some technical battles out there today. We are trading around the 200-day moving average and I think that is where a lot of the action of the last two days has been,” Jakob told Reuters.

Investors continue to watch OPEC’s output.  In July, a Reuters survey found the cartel’s output rose by 90,000 b/d to a 2017 high thanks to a recovery in Libya’s oil industry.  As well, Iran’s oil exports rose in July by 45,000 b/d compared with June, according to SHANA, the oil ministry’s news agency.

Douglas Westwood, an energy consultancy, believes the market this year will be slightly undersupplied but the glut will return in 2018 and last until 2021.

“Oversupply will actually return in 2018. This is due to the start-up of fields sanctioned prior to the downturn,” said Steve Robertson, head of research for global oilfield services at Douglas Westwood.

BP predicts $45 to $55 oil in 2018…just more of the same

“Global demand is looking pretty strong, and prices will firm around the levels seen today,” Brian Gilvary, BP’s chief financial officer, told Reuters.

“We can now see where the price elasticity is. As the price comes up to $52-$53 a barrel we start to see some uptick in activity, as it drops to $45, we start to see that curtailing.”

The British oil and gas giant expects global oil demand to rise from 95 million b/d in 2016 around 96.5 million b/d.