Oil prices edged higher today as the market balanced weak demand with supply disruption amid a looming rail stoppage in the US, the world’s biggest crude consumer.
Brent crude futures was up by two cents to $94.12 a barrel in early trade, while US West Texas Intermediate crude rose 18 cents, or 0.2%, to $88.66.
“The oil price has been pricing in a global recession, but even with flat global growth, the oil demand would remain quite strong relative to continued supply worries,” said Clifford Bennett, chief economist at ACY Securities in a note.
The market has been focusing on the demand side of late but has probably priced too big a fall in actual demand while forgetting supply can still be somewhat problematic, said Bennett.
The increasing likelihood of a US rail stoppage due to an ongoing labour dispute is also adding support to the market.
Three unions are negotiating for a new contract that could affect rail shipments, which are important for crude and product deliveries.
The International Energy Agency (IEA) said it expects widespread switching from gas to oil for heating purposes, saying it will average 700,000 barrels per day (bpd) in October 2022 to March 2023 – double the level of a year ago.
That, along with overall expectations for weak supply growth, also helped boost the market.
But data released by the Energy Information Administration showed US crude and distillate inventories rose more than expected in the most recent week, suggesting weaker fuel demand and putting a lid on oil prices.
Meanwhile, expectations of further US interest rate hikes will continue to cloud the market and limit the rebound of oil prices, said analysts from Haitong Futures.
For refineries, TotalEnergies cut production at its 238,000 barrel-per-day Port Arthur, Texas, refinery because of the planned shutdown of two sulfur recovery units yesterday, sources familiar with plant operations said.