U.S. crude oil trades above $82 per barrel, on pace for second weekly gain in a row

Nick Oxford | Reuters
  • West Texas Intermediate is on pace for a second consecutive weekly gain.
  • JPMorgan forecasts that Brent will hit $90 on summer fuel demand by September.
  • U.S. crude oil, gasoline, and diesel inventories all fell last week.
  • Patrick de Haan, analyst at GasBuddy, said the stockpile drawdowns could lead to higher gas prices.

U.S. crude rose Thursday to trade above $82 per barrel, with the benchmark heading for its second weekly gain in a row, as oil and gasoline inventories fell.

West Texas Intermediate has gained 4.7% this week, while global benchmark Brent is up 3.7%. Prices found support Thursday as U.S. crude and gasoline stockpiles fell for the first time in weeks, suggesting an uptick in demand.

Here are Thursday's closing energy prices:

  • West Texas Intermediate July contract: $82.17 per barrel, up 60 cents, or 0.74%. Year to date, U.S. oil has gained 14.6%.
  • Brent August contract: $85.71 per barrel, up 64 cents, or 0.75%. Year to date, the global benchmark is ahead by 11.2%.
  • RBOB Gasoline July contract: $2.50 per gallon, up 0.71%. Year to date, gasoline has risen 18.9%.
  • Natural Gas July contract: $2.74 per thousand cubic feet, down 5.78%. Year to date, gas is up roughly 9%

Crude inventories declined by 2.5 million barrels last week, according to data released by the Energy Information Administration Thursday. The drawdown outpaced the expectations of analysts surveyed by Reuters.

Gasoline stocks fell by 2.3 million barrels, while analysts forecast a 620,000 barrel build. And distillate inventories, which includes diesel, dropped by 1.7 million barrels, while analysts expected a 261,000 barrel increase.

Patrick de Haan, head of petroleum analysis at GasBuddy, described the drawdowns as the "wrong trifecta," warning that prices at the pump are likely to rise as a consequence.

JPMorgan analysts told clients in a Thursday note that the seasonal uptick in oil demand, refinery runs, weather risks, and OPEC+ extending production cuts through the third quarter should lead to a tighter market as inventories draw down. The investment bank forecasts Brent will hit $90 per barrel in September as the market tightens on falling inventories.

Crude oil has proven resilient with upside momentum firming, Ryan McKay, senior commodity strategist at TD Securities, told clients in a research note Wednesday. He cautioned, however, that the rally could fade. Commodity trading advisors could ease up on buying and liquidate some of their lengths if U.S. oil drops below $80.33 and Brent falls under $84.92, McKay said.

Tensions are also escalating in the Middle East again, with Israel and the Iran-backed militia group Hezbollah threatening war.

Israel's military said Tuesday in a statement on social media that "operational plans for an offensive in Lebanon were approved and validated." On Wednesday, Hezbollah leader Hassan Nasrallah warned Israel in a televised speech that the militant group would fight with "no rules and with no red lines" if war breaks out.

Oil prices rallied in April to annual highs as OPEC member Iran and Israel nearly went to war. Traders shifted focus back to market fundamentals after tensions eased, unwinding the risk premium that had lifted crude futures.

"While many market participants have relegated this conflict to the back burner, we continue to warn that an Israel-Hezbollah confrontation could prove to be the tripwire for direct Iranian involvement in the war given Tehran's staunch support for its most important armed proxy," Helima Croft, global head of commodity strategy at RBC Capital Markets, told clients in Thursday note.

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