Well-supplied global oil markets - highlighted by U.S. inventories at multi-decade highs - are expected to keep a firm lid on prices this week , though upside surprises may come from better-than-expected U.S. data and continued unrest in the Middle East.
Sentiment was evenly split in CNBC's latest oil market survey, with five respondents calling for higher prices this week and five looking for declines . Still, the balance of opinion may shift in favor of a more bearish bias if U.S. supplies continue to build, the stronger dollar persists and as data from China, the world's second-largest economy, disappoints.
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"The oil market remains oversupplied, with U.S. crude oil stocks at a record level and gasoline stocks in the Amsterdam-Rotterdam-Antwerp (ARA) region riding at a five-year high," said Eugen Weinberg, head of commodity research at Commerzbank.
Citing a monthly report from the Organization of the Petroleum Exporting Countries (OPEC), Commerzbank added that there are downside risks for global oil demand "first foremost' as a result of China, even though the group envisages stronger oil demand and an increased call on OPEC in the second half of the year.
"Positive news about demand is therefore needed if oil prices are to climb," Weinberg said.
Brent crude oil rose $1.08 to settle at $103.68 a barrel Wednesday after falling to $101.20 earlier in the day. U.S. crude futures gained 9 cents to settle at $94.30 a barrel after U.S. stock markets made new highs. The spread between two widened to settle at $9.38, the highest in 13 sessions, Reuters reported.
Refinery crude throughput in China, the world's second-largest consumer, fell 3 percent in April from March, its lowest daily rate since last September, as refineries entered maintenance season, Reuters reported. Implied oil demand was up 3.2 percent in April from a year earlier to about 9.6 million barrels per day, the lowest in eight months.
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Still, momentum is building slowly in the U.S. economy though the overall recovery remains patchy. U.S. retail sales edged up 0.1 percent in April, after a revised 0.5 percent decline in March, data on Monday showed. Economists polled by Reuters had expected retail sales to drop 0.3 percent last month.
However, some market watchers say further proof is needed to convince the market that the economy is on the mend.
"We are seeing global growth slowing and if the U.S. growth momentum slows I expect this to put significant downward pressure on oil prices," said Philip Silverman, Partner & Portfolio Manager at Kingsview Management. "A strong dollar is also negative for oil prices, but not as important as growth, which directly affects the demand for oil."
Positive U.S. retail sales data supported the idea that the U.S. economy was continuing to recover but it did not apply to gasoline sales, underscoring ailing demand for the fuel. The retail data also strengthened the U.S. dollar, which had a negative impact on the price of crude oil.
Jonathan Barratt, founder of commodities newsletter Barratt's Bulletin, expected U.S. crude futures to trade between $92.50 and $98.50 "on the topside." With U.S. inventories at 82 year highs, "I will be keen to look at the (supply) data," he said, adding any price gains are unlikely to last because markets are fundamentally well-supplied.
U.S.crude inventories fell last week from record highs, but gasoline and distillate stocks rose along with refinery rates, the supply data from the government's Energy Information Administration showed on Wednesday.
Stocks at the Cushing, Oklahoma, crude storage hub rose 575,000 barrels to 49.72 million barrels.
"Although today's report was mixed,the figures were dominated by bearish stock builds for Cushing crude and for gasoline," Societe Generale's Michael Wittner said in a report.
"Despite new pipelines, Cushing stocks continue to trend sideways, not lower. 4-week average U.S. total product demand contracted by 188,000 barrels a day year-on-year, to 18.54 million barrels a day (-1.0 percent). Domestic demand for gasoline and diesel has been weak."