07 July 2016, London — Oil prices edged higher on Thursday for the second day, supported by a report of another fall in U.S. crude oil inventories and a weaker U.S. dollar, although a glut of refined products and economic growth concerns continued to loom over the market.
Brent crude oil futures were trading at $49.50 per barrel at 0857 GMT on Thursday, 70 cents above their last settlement. U.S. West Texas Intermediate (WTI) crude was trading at $48.08 per barrel, up 65 cents from its last close.
Traders said that a report of a reduction in available U.S. crude oil stockpiles was the main price driver, along with a slight weakening in the U.S. dollar, which makes oil more affordable for holders of other currencies.
The American Petroleum Institute (API) said its data showed U.S. crude stockpiles fell by 6.7 million barrels last week, declining for a seventh week in a row.
The data also was bullish for oil products, showing draws in both diesel and gasoline.
“Oil demand growth remains robust,” UBS said in a note, adding that “a historically high level of physical inventories … is no bar to a rising price if the direction of travel in market adjustment is supportive.”
The bank raised its price forecasts for 2016 and 2017.
However, traders warned that an economic slowdown and a glut in supplies of refined products were weighing on oil markets.
Asian crude demand is slowing and by some measures falling, which market participants said could be due to an economic slowdown and perhaps even more permanent structural changes.
“Growth is slipping again … and things don’t seem quite so rosy,” HSBC said in a note to clients.
Oil industry observers warned that fallout from Britain’s vote to leave the European Union last month could weigh on oil prices if the market turmoil spread outside Europe.
“Yesterday’s optimism both in the equities and oil markets could evaporate quickly as the negative impact of Brexit will stay with us for the foreseeable future,” analysts PVM said in a note.
German industrial output plunged unexpectedly in May for its steepest monthly drop since August 2014, data showed on Thursday, suggesting Europe’s largest economy lost steam in the second quarter after a surprisingly strong start to the year.
On the supply side, Libyan officials said oil export terminals that have been shut since 2014 could open again soon, potentially restoring 600,000 barrels per day of crude export capacity.
*Libby George; Henning Gloystein; Editing – Greg Mahlich – Reuters