Crude oil futures ticked up slightly July 23, ending higher for the fourth consecutive day on optimism that global production increases would fall short of a demand recovery.
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Front-month NYMEX WTI rose by 16 cents to settle at $72.07/b, while ICE September Brent picked jumped 31 cents to settle at $74.10/b.
In refined products, NYMEX front-month RBOB added 1.81 cents to settle at $2.2913/gal, while ULSD tacked on 13 points to $2.1339/gal.
NYMEX front-month crude remained up well more than $5/b since July 19, when prices tumbled $5.39/b primarily on concerns of rising production and fears that the spread of the coronavirus delta variant would hamper global economic recovery.
"Vaccines are proving instrumental in preventing severe cases of COVID which stress the health system," said S&P Global Platts Analytics in a report. "Increases in COVID cases are noted in the UK, Europe, US, Russia, and a host of Asian countries. While it is a problem and could temper the pace of normalization in economic growth it is not seen derailing the broad expected improvement."
There is more market stability with the new OPEC+ deal to continue unwinding production cuts this year and through the end of 2022, analysts said. And while US crude production is at a 14-month high of 11.4 million b/d, prognosticators do not expect much more growth in the near term.
"Oil prices seem poised to head higher given US production is close to peaking, and since OPEC+'s gradual plan to increase output will leave this market with a huge demand deficit," said Edward Moya, senior market analyst for OANDA.
Energy markets July 23 largely brushed off mixed US economic data from the IHS Markit July US purchasing managers' index, which showed better-than-expected manufacturing activity but worsening services activity. The weaker services PMI is mainly attributed to the ongoing labor shortage woes that have not shown any immediate signs of improving, especially as the delta variant continues to spread.
Meanwhile, global oilfield services leader Schlumberger reported July 23 its fastest revenue growth in four years.
Despite concerns of the delta variant causing starts and stops in the economic recovery, Schlumberger CEO Olivier Le Peuch said the growth momentum should continue through the rest of 2021 and beyond as the cyclical recovery continues from the pandemic.
While North America drove the growth in the first half of the year, he said, the international activity is taking the lead going forward. This is especially true as publicly traded US producers continue to practice more fiscal constraint for now.
"In North America, we expect the growth rate to moderate; however drilling activity could still surprise to the upside due to private E&P operator spending," Le Peuch said in a July 23 earnings statement. "Consequently, absent any further setback in the recovery, we continue to see our international revenue growing in the second half of 2021 ... setting the stage for a strong baseline as we move into 2022 and beyond."
Likewise, oilfield services rival Baker Hughes said July 21 that US shale drilling growth should slow down — but continue an upward trajectory — in the back half of the year.
"US shale drilling appears poised to decline for the rest of the year and that should keep OPEC+ content in gradually raising output," Baker Hughes added. "WTI crude appears poised to consolidate between the $70 and $75 level in the short term."
And, while US crude inventories climbed 2.1 million barrels last week, following eight consecutive weeks of declines, stocks at the WTI delivery and pricing point of Cushing, Oklahoma, have fallen roughly 22 million barrels since early January, according to US Energy Information Administration data.
With refined products crack spreads and margins holding up, refiners have little incentive to cut runs, which should help tighten inventories.