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Oil prices have recovered significantly last week primarily due
to the continued decline in US crude inventories. This suggests
that supply has further tightened, especially in combination with
increased risk of future disruptions related to the rising tension
in the Middle East Gulf. The seizure of a tanker carrying Iranian
crude by the UK off the coast of Gibraltar has contributed to the
sentiment. Meanwhile, there is some hope for improvement in the
relationship between Washington and Beijing as negotiations proceed
with optimism that the trade war could be resolved later this
year.
As real numbers exceeded earlier expectations, the market
reacted by pushing oil prices higher. Brent flirted with 68 USD per
barrel, while West Texas Intermediate surpassed 60 USD per barrel,
the highest since late May. The current sentiment in the market
seems to have changed, as stockpiles shrank by around 3.5% since
reaching the highest level in almost two years in early June. The
declining inventories of the US, together with Iran's rhetoric have
shaped expectations for tightening supply, even if this happens in
parallel to higher concern about declining demand for crude
oil.
Furthermore, the movements in the oil prices have also been
supported by earlier concerns that Tropical Storm Barry could
affect crude production in the Gulf of Mexico. As the storm was
expected to approach Louisiana, with flooding already caused in the
region, petroleum producers have been evacuating and shutting in
production at some platforms.
Crude oil prices have decreased after the weekend as Tropical
Storm Barry weakened without any long-lasting disruptions in US
infrastructure. Meanwhile, an International Energy Agency (IEA)
report warned that surplus unexpectedly returned despite OPEC+'s
production cuts.
According to data by IHS
Markit's Commodities at Sea, volumes of oil seem to have
increased for VLCCs since the beginning of this month having
surpassed 625 million barrels. Meanwhile, volumes on Suezmaxes have
been pushed marginally lower, while levels have been rather stable
for Aframaxes.