By Barani Krishnan
Investing.com — What goes down must come up — at least in the world of oil.
Crude prices jumped for a fourth session in five days of trading, recovering a chunk of what they lost in the previous week, as bulls bought the dips in a market that had cratered from key $100 pricing to below $90.
, the London-traded global benchmark for crude, settled up $2.20, or 2.3%, at $99.60, after a session peak at $100.08. Brent is up more than 5% on the week, after losing 14% last week.
, the benchmark for U.S. crude, settled up $2.41, or 2.6%, at $94.34 per barrel, after coming just 10 cents short of hitting $95 at the session high. WTI is up almost 6.5% on the week after a 10% tumble last week.
Technical charts for WTI suggest it could return to $100 too if current momentum held, said Sunil Kumar Dixit of SKCharting.com.
“A sustained break above $95.40 and $96.60 can extend the bounce beyond the 50-Day EMA of $100.26,” Dixit said, citing the Exponential Moving Average.
The oil rally was in contrast to what was happening on the ground with oil.
The average pump price of gasoline in the United States, arguably the biggest indicator of real oil demand, was below the key $4 per gallon level on Monday for the first time in months after a record high $5 per gallon in mid-June, which prompted American drivers to exercise more discretion in their fuel usage.
While some of the factors contributing to this week’s rally in oil looked debatable — a spike in gasoline sales at pumps, for instance, was offset by a slump in crude oil demand from refiners — the reasons for Thursday’s gains were even more in contrast.
The International Energy Agency — which typically is bearish on oil demand — said soaring international prices for could prompt more energy consumers to switch to oil for year-end heating purposes.
“Natural gas and electricity prices have soared to new records, incentivizing gas-to-oil switching in some countries,” the Paris-based IEA said in its monthly oil report. It raised its outlook for 2022 oil demand by 380,000 barrels per day.
Meanwhile, the Organization of the Petroleum Exporting Countries, which usually does all it can to push crude prices up, cut its 2022 forecast for growth in world oil demand.
OPEC said it expects 2022 oil demand to rise by 3.1 million bpd, down 260,000 bpd from its previous forecast.
While that itself might look odd — OPEC degrading oil demand when it wants higher prices — the cartel is an adept operator when it comes to “creating conditions” for production cuts. In this case, OPEC’s forecast of lower demand would justify lower output (read: cuts) by the group, which would, consequently, boost prices.
Crude prices also benefited from calls by Wall Street’s top cheerleader for oil — Goldman Sachs — for new highs by the year-end.
“Crude oil demand is rising from here,” Goldman said, predicting gasoline prices back at above $5 a gallon and Brent at above $130 by the year-end.