Oil futures: Crude rebound gains momentum, Brent rallies 4%
Quantum Commodity Intelligence - Crude oil futures Thursday were sharply higher but markets remained volatile as recessionary fears vs supply/demand balance continued to dominate the week's sentiment, although bulls have fought back in highlighting tight fundamentals.
Front-month September ICE Brent futures were trading at $104.73/barrel (1845 GMT), compared to the day's low of $98.50/b and Wednesday's settle of $100.69/b.
At the same time, August NYMEX WTI was trading $102.73/b, versus Wednesday's settle of $98.53/b.
The price rebound was also underpinned by the latest US data from the EIA, showing firm domestic demand and record refined product exports.
Citigroup led the bearish calls this week for a major price correction, setting out a 'worst case' scenario where prices could drop to $65/b by the end of this year and $45/b in 2023 in the event of a global recession.
Ed Morse, global head of commodity research at Citigroup, told Bloomberg TV that the outlook for oil demand would see further downward revisions amid higher fuel prices, accelerating demand destruction.
"Almost everybody has reduced their expectations of demand for the year," said Morse. "Demand is simply not growing on an empirical basis to the degree that people had expected."
Even perma-bull Goldman Sachs acknowledged recessionary pressures in its latest investor note but saw this week's oil price downturn as a blip rather than a trend.
"While the odds of a recession are indeed rising, it is premature for the oil market to be succumbing to such concerns," said Goldman. "The global economy is still growing, with the rise in oil demand this year set to significantly outperform GDP growth."
Wayne Gordon, a strategist at UBS Group AG Wealth Management, also interviewed by Bloomberg TV, followed the Goldman view that markets remain fundamentally sound.
"Prices will march higher once we get past this current bout of risk-off. We've seen a number of (production) issues in North Africa, we've seen OPEC potentially missing production targets. And when you look at even the demand side, it continues to remain robust if not improved."
The American Petroleum Institute (API) reported late Wednesday that US commercial crude inventories increased by 3.8 million barrels last week, confounding expectations for a small draw. Gasoline stocks were down by 1.8 million barrels, while distillate inventories dropped by 635,000 barrels.
Meanwhile, markets largely shrugged off news that the US Treasury is freezing the assets of members of an international network for violating oil sanctions on Tehran.
