On Wednesday, crude oil futures rose due to expected supply tightening, but the Federal Reserve only expected one rate cut this year and an unexpected increase in US crude oil inventories, which subsequently suppressed the rise in oil prices. The US Energy Information Agency (EIA) predicts that global oil demand will grow to 1.1 million barrels per day this year, and the market expects supply shortages in the third quarter to drive Brent oil prices to $86 per barrel.

Expectations of supply shortages driving up oil prices

On Wednesday, crude oil futures rose due to market predictions of supply tightening this year. The EIA predicts that global oil demand will grow by 1.1 million barrels per day this year, higher than the previous forecast of 900,000 barrels. This indicates a supply gap, and it is expected that world production will increase by 800,000 barrels per day in 2024.

According to a report by Martijn Rats, a commodity strategist at Morgan Stanley, the oil market may tighten in the short term, with a supply shortfall of 1.2 million barrels per day in the third quarter, driving Brent crude oil prices to $86 per barrel.

US inventory data puts pressure on oil prices

After the EIA report showed an increase of 3.7 million barrels in crude oil inventories last week (while analysts expected a decrease of 1 million barrels), oil prices fell. Gasoline inventories also increased by 2.6 million barrels, higher than analyst forecasts of 891,000 barrels. Although the summer driving season has begun, the average daily fuel demand has only slightly increased by 94,000 barrels, which is 1.5% lower than the same period last year.

The Fed's interest rate policy affects the market

The further decline in oil prices is partly due to the Federal Reserve's indication that it will only cut interest rates once this year, rather than the three times predicted in March. The Federal Reserve has pointed out that only moderate progress has been made in curbing inflation.

OPEC and the International Energy Agency have inconsistent prospects

OPEC currently maintains its demand growth forecast of 2.2 million barrels per day, which is mainly based on strong demand brought about by global economic growth of 2.8%. However, the International Energy Agency holds a pessimistic attitude, believing that demand is weakening and supply is increasing.

Citigroup analysts predict that crude oil will be tight in the third quarter due to summer fuel demand, but believe that the planned increase in OPEC+production will lead to a bear market from the end of 2024 to the beginning of 2025, and Brent crude oil prices may fall to $60 per barrel.

Wednesday Energy Price Closing Price Overview:

●WTI crude oil

July contract: $78.50 per barrel, up 60 cents, or 0.77%. Since the beginning of the year, oil prices in the United States have risen by 9.5%.

●Brent crude oil

August contract: $82.60 per barrel, up 68 cents, or 0.83%. Since the beginning of the year, global benchmark oil prices have risen by 7.2%.

●RBOB gasoline

July contract: $2.39 per gallon, down 0.6%. Since the beginning of the year, gasoline prices have risen by 13.8%.

● Natural gas

July contract: $3.04 per thousand cubic feet, down 2.68%. Since the beginning of the year, natural gas prices have risen by 21%.