Today's fuel prices (May 18): Mixed trends

World oil prices

Reuters reported that at the close of trading on May 17, oil prices rose by about $2 as optimism about oil demand and negotiations on the US debt ceiling outweighed concerns about supply.

Brent crude futures for July delivery rose $2.05, or 2.7%, to $76.96 per barrel. US WTI crude rose $1.97, or 2.8%, to $72.83 per barrel. Jim Ritterbusch, president of Ritterbusch and Associates in Galina, Illinois, commented that the strong oil trading on May 17th was driven by expectations of a debt ceiling agreement later this week. These expectations appear to be helping to alleviate negative pressure on most asset classes, including oil.

According to Reuters, on May 17, US President Joe Biden and Republican Congressman Kevin McCarthy emphasized their determination to reach an agreement soon to raise the $31.4 trillion debt ceiling and avoid a catastrophic default. The agreement is hoped to be reached and passed by both houses of Congress before the federal government runs out of money to pay its bills after June 1.

Optimism about a debt ceiling deal overshadowed the U.S. Energy Information Agency (EIA) report on an increase in U.S. crude oil inventories for the week ending May 12. According to the EIA, U.S. oil reserves rose by 5 million barrels, contrary to and far exceeding the 900,000-barrel decrease predicted by many analysts consulted by Reuters.

Rising crude oil inventories have heightened concerns about US growth after data showed retail sales in April rose 0.4%, lower than the estimated 0.8% increase.

In contrast to the increase in oil inventories, US gasoline inventories fell by 1.4 million barrels. The International Energy Agency (IEA) predicted on May 16th that oil demand will exceed supply by 2 million barrels per day in the second half of this year. China will account for 60% of oil demand growth in 2023. In China, lower-than-expected industrial production and retail sales growth in April suggest the East Asian nation's economy lost momentum at the start of the second quarter.

Data released by China's National Bureau of Statistics (NBS) showed that industrial production rose 5.6% in April year-on-year, up from a 3.9% increase in March. However, this increase was still significantly lower than the 10.9% expected in a Reuters poll of analysts, although it still marked the fastest growth rate since September 2022. Retail sales, a measure of consumption, rose 18.4% – the fastest increase since March 2021. In March, the increase was 10.6%. However, the April increase was still lower than analysts' forecasts of a 21% increase.

Despite weak economic data from China, Vandana Hari, founder of oil market analysis firm Vanda Insights, said markets are in "wait-and-see mode" regarding the outcome of debt ceiling negotiations.