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The price of crude oil isn't exactly surging on Thursday - but apart from that, there is no end to the good news for oil producers.

The U.S. Energy Department noted in its weekly inventory data that crude oil stockpiles fell 5.9 million barrels, well above estimates for a decline of just 1.6 million barrels. This suggests, for the time being at least, that energy consumption is on the rise.

As well, TD Securities pointed out that the supply-and-demand fundamentals are improving for crude oil. This suggests that the Organization of Petroleum Exporting Countries (OPEC) knew what it was doing when it left its output quotas unchanged after a Wednesday meeting.

According to Dina Cover, an economist at TD, the rise this year in the price of oil has more to do with money flows than improving consumption fundamentals, but this is starting to change.

Global demand is still depressed, but July consumption fell 2 million barrels a day from last year's levels, an improvement over the second quarter average of 3 million barrels a day. Put another way, July oil demand fell 2.2 per cent but oil supply fell by a steeper 3.3 per cent. In other words, things are getting less bad.

"As a result, for the first time in 15 months, consumption outpaced production in July, creating a supply deficit of 300,000 barrels per day," Ms. Cover said in a note. "Although this is just one month's worth of data, early estimates suggest that this trend continued into August."

Indeed, the International Energy Agency said in its monthly Oil Market Report that oil demand would rise 1.5 per cent next year, due to an economic recovery.

Crude oil didn't move much on the news. On Thursday afternoon, it traded at $72.04 (U.S.) a barrel, up 73 cents - but it had been moving in and out of positive territory for most of the day.

However, Canadian oil producers were benefiting. Suncor Energy Inc. rose 3.7 per cent, EnCana Corp. rose 2.6 per cent and Canadian Natural Resources Ltd. rose 2.2 per cent.

Follow on Twitter: @dberman_ROB

 

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