On Thursday, oil prices recovered from multi-month lows as traders turned their attention to expectations for U.S. demand and fresh sanctions on Russia. Global oil prices were headed toward their lowest point in over two years earlier in the session, following the lowering of an energy watchdog's expectations for increased international oil demand for both this year and next.
Brent crude prices climbed on Thursday after trading lower to a 16 month low previously in the day after a report by the International Energy Agency showed reduced demand and high supply across the globe.
Oil prices gain on sinking demand
On the New York Mercantile Exchange, light, sweet crude for October delivery increased $1.16, or 1.3 percent, at $92.83 a barrel. Amid falling global oil demand this summer, the U.S. has been a bright spot, as U.S. refineries have run at abnormally high rates to capitalize on increasing domestic production of oil, which is inexpensive compared to international oil prices, reports The Wall Street Journal.
According to Market Watch, Darin Newsom, a senior analyst with Telvent DTN said that commercial buyers, like refiners, stanched the bloodletting while New York-traded oil "came within shouting distance" to a long-term price floor nearing $90 a barrel. "It was enough to spike the market off lows," he said.
The Energy Department said in a report on Wednesday, that the U.S. will produce the highest amount of crude since 1970 as a result of the surge in shale production, reports NASDAQ. Refineries have processed over 16 million barrels of crude oil per day for 11 consecutive weeks, which is a record-breaking stretch above that level, according to the U.S. Energy Information Administration.
Though demand for crude oil usually declines in September and October as refiners close units for seasonal maintenance, some analysts say that it's possible that refineries could put off this year's maintenance to take advantage of high margins in the market.
Carl Larry, analyst at Oil Outlooks & Opinions said, "Refining margins are still good, so they're going to keep producing as long as they can. When you look at the real weakness in demand, it's coming anywhere else but America," according to The Wall Street Journal.
Global oil market
October Brent crude on London's ICE Futures Exchange traded up 4 cents, or less than 0.1 percent, to close at $98.08 a barrel. It had previously traded at levels as low as $96.72, its lowest since July 2012. Earlier Wednesday, Brent had declined to $97 per barrel, "as the recent disappointing oil fundamentals weigh heavily on market sentiment, offsetting any geopolitical risks in Middle East," according to Myrto Sokou, senior research analyst at Sucden Research, reports The Wall Street Journal.
The IEA forecasts that global oil demand will increase this year by 0.9 million barrels a day. This is 65,000 barrels a day less compared with the Paris-based group's expectations released the previous month, and 300,000 barrels a day less since July, according to Market Watch.
The cut in the IEA's demand expectations came after a similar move on Wednesday by OPEC, which was a factor in oil's close at an eight-month low in the previous session. The IEA reported a "pronounced slowdown" in the second quarter's demand growth and weaker forecasts for Europe and China as being primarily responsible for the lowered expectations. It also trimmed its expectations for demand growth in 2015.
Meanwhile, in the energy complex, natural gas for the same month declined 13 cents, or 3.3 percent, at $3.8230 per million British thermal units, which was its biggest one-day percentage and dollar drop in a week. On Thursday, the EIA U.S. natural-gas inventories climbed 92 billion cubic feet on the week ended Sept. 5, exceeding forecasts by the market. October diesel also rose 0.28 cent, or 0.1 percent, at $2.7561 a gallon, reports Market Watch.
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