U.S. crude oil extends gains, trades above $78 as Department of Energy sees supply deficit

U.S. crude oil rose more than 1% Wednesday, extending this week’s rally as OPEC and the Department of Energy see steady demand this year.

The Department of Energy raised its global consumption growth forecast to 1.1 million barrels per day, up from 900,000 bpd previously. The increased demand implies a supply deficit with world production expected to rise 800,000 bpd in 2024.

“In the short term, the oil market is likely to tighten,” Martijn Rats, commodity strategist at Morgan Stanley, told clients in a note. The investment bank sees a 1.2 million bpd deficit in the third quarter, which could push Brent prices to $86 per barrel.

Here are today’s energy prices:

• West Texas Intermediate July contract: $78.86, up 96 cents, or 1.23%. Year to date, U.S. oil has gained 10%.
• Brent August contract: $82.80 per barrel, up 87 cents, or 1.06%. Year to date, the global benchmark is ahead 7.5%.
• RBOB Gasoline July contract: $2.43 per gallon, up 1.12%. Year to date, gasoline has advanced 15.9%.
• Natural Gas July contract: $3.09 per thousand cubic feet, down 1.34%. Year to date, gas is up 22.8%.

OPEC, meanwhile, stuck to its demand growth forecast of 2.2 million bpd on solid global economic growth of 2.8% this year. Those forecasts clashed with a bearish outlook from the International Energy Agency, which sees weakening demand and rising supplies.

Citi analysts described the recent price action as rangebound, with volatility near a decade low. The bank also expects a tight third quarter due to summer fuel demand, though it anticipates the planned OPEC+ production increases will make for a “bear market” late in 2024 and into 2025 with Brent falling to $60 per barrel.

Traders are monitoring the latest U.S. inflation data, the Federal Reserve meeting, and the latest U.S. inventory report later today.