Oil prices were stable in early trading on Friday, supported by strong demand and global supply disruptions, but a stronger dollar kept crude below the 2016 highs reached this week.
International Brent crude oil futures were trading at $51.96 per barrel at 0101 GMT, up 1 cent from their last settlement. U.S. West Texas Intermediate (WTI) futures were flat at $50.56 a barrel.
Analysts said that a rebound in the dollar had dented oil prices by making fuel imports for countries using other currencies more expensive, but strong overall oil demand as well as supply disruptions were supportives.
“Oil prices eased back from a near 12-month high as the dollar reversed its recent trend,” ANZ bank said on Friday.
“Despite falling slightly overnight, the outlook for oil (prices) remains positive – which should keep the recent upward trend intact,” is added.
Crude prices have virtually doubled since hitting decade lows in early 2016 as strong demand and supply disruptions erode a glut that had pulled down prices by as much as 70 percent between 2014 and early 2016.
Market rebalancing is ongoing. On the demand side, global refining activity is about to hit its highest on record just as crude supply disruptions around the world tighten the market.
Data in Thomson Reuters Eikon shows that available global refining capacity will reach 101.8 million barrels per day (bpd) in August, its highest on record, and up from around 97.25 million bpd in March.
Traders said that this means that producers need to pump every barrel of crude they can to meet refinery demand, and that the supply disruptions around the world – from Canadian wildfires, Nigerian sabotage acts, and output cuts in the United States, Venezuela, and Asia – will tighten the market and eat into inventories.
Yet the strong refinery output could end as fast as it came as the reserve capacity, the difference between available and installed capacity, is about to fall below half a million bpd, the tightest since late 2013, the data shows.
“Beyond the short-term bullishness the high refining activity means for oil prices, this means that refinery activity and, by extension, refinery crude demand, can basically only go down as facilities either go into unplanned outage or refinery runs are cut to reduce an emerging product glut,” said one trader in Singapore.