Oil prices are steadily growing as crude stockpiles have been declining for six weeks.
According to the report of the American Petroleum Institute, crude inventories declined by 6.36 million barrels last week, marking the reduction of oil supply. At the same time, manufacturing reports from China and the USA came out better than analysts expected, which in turn should positively impact the overall consumption and oil demand as well. However, investors have doubts that demand may drop in a few next months as China is planning to cut oil imports after a buying binge earlier this year.
“There is not a lot of meat on the bone right now to drive the market convincingly higher above $45,” said Stephen Innes chief market strategist at AxiCorp. He added that future recovery is still highly uncertain. Nevertheless, analysts from Fitch Solutions consider that oil-consuming may recover faster than the oil supply and, therefore, lead to higher oil prices in the near term. Even more, Goldman Sachs claimed Brent crude to reach $65 a barrel in the third quarter of 2021 due to the wide availability of the Covid-19 vaccine, which will boost oil consumption.
Returning to the issue of oil supply, Hurricane Laura led to a 53% contraction of the oil production in the Gulf of Mexico. In addition, analysts foresee that Venezuela’s oil supply may even drop to zero by 2021. IHS Markit has assessed that the country is generating around 100 000-200 000 barrels every day, and these numbers are declining. That also helped to reduce the oil glut. Elsewhere, it is said that Venezuela may not be capable to withstand the current pressure of all the rigors: record low oil prices, US sanctions, and economic downturn.