Oil’s rise to US$50 a barrel earlier this month proved to be short-lived, but at least it suggested that oil prices had established a new and higher range. We might not be looking at a return to US$100-a-barrel WTI anytime soon, but prices seem to have stabilized somewhat, remaining north of US$40 for several weeks now.
Who knows how long this will last, of course. Support for higher prices has come at least in part from supply disruptions — in Nigeria and Libya, as well as Alberta, thanks to the Fort McMurray fires. Recent U.S. Energy Information Administration data suggest that stockpiles of crude are coming down.
Yet things like supply disruptions are difficult to predict, and even harder to count on when it comes to having a lasting impact on the supply glut. The better news might be that the other side of the supply-demand imbalance is starting to do what it’s supposed to do: There are signs that global demand is picking up.
In the largest oil market in the world, the United States, gasoline consumption is growing strongly. Perhaps that’s not a surprise, given robust employment growth and the beginning of the summer driving season.
Meanwhile, investor concerns over a hard landing in China — the world’s second largest oil consumer — have eased somewhat, and that has stabilized prices. But it’s in India that the real demand story may be playing out.
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