Oil prices rise on strong demand, but market remains tight

Oil prices
Oil prices rose on data showing increased demand in China. QEP Resources photo.

Oil prices rise, but market players wait for next price catalyst

On Tuesday, oil prices rose as demand for crude, particularly in China, helped tackle the global oil supply glut, but Reuters reports traders say the market remains in a tight range and shows few signs of big short-term moves.

Brent crude settled up 42 cents to $48.84/barrel and US light crude ended the day 38 cents higher at $46.40.

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“We’re stuck in a range that … will be tough to break out of without some kind of political factor coming into play,” Matt Stanley, fuel broker at Freight Investor Services told Reuters.

Data released on Monday showed refineries in China had increased their crude throughput to the second highest amount recorded last month.

But markets remain well supplied and the OPEC supply cut deal has down little to tighten the market or boost prices.  OPEC members Libya and Nigeria were exempted from the pact and have recently brought some of their production back online.

Ecuador, another OPEC member participating in the agreement, has restricted only 60 per cent of its agreed upon output.  Oil Minister Carlos Perez said the cuts came up short to allow Ecuador to deal with its fiscal deficit.

“We are not meeting the quota imposed on us because of the obvious needs the country has,” Perez said.

As well, US production is also climbing.  The US Energy Department predicts US shale output to increase for the eighth straight month in August, climbing by 112,000 barrels per day to 5.585 million b/d.

“With little sign of the OPEC-shale tug of war drawing to an end, the scene is now set for a period of range-bound trading as market players await the next price catalyst,” Stephen Brennock at brokerage PVM Oil Associates told Reuters.