On July 22nd, market analyst Grant Smith wrote that signals from the oil spot market suggest that prices may break through an upward channel. The consumption of global oil inventories and the increase in immediate delivery premiums support a bullish outlook. However, forecasters predict that the rate of inventory decline in the fourth quarter will slow down and supply will increase.

Smith said that oil prices may be limited to a narrow range this month, but a series of signals in the spot market suggest that the next step may be to break through the upward trend.

Firstly, the time spread between monthly futures contracts. Over the past six weeks, as the United States has pushed demand to its summer peak, the premium for spot delivery has increased. Under the pressure of global economic concerns, the so-called average crude oil price has fallen behind, but it may need to catch up sooner or later.

The deep-rooted premium of spot supply (i.e. spot premium) indicates that global oil inventories are rapidly depleting at the rate expected by forecasting agencies such as the International Energy Agency (IEA) this quarter. The significant decline in US crude oil inventories confirms this, with a decrease of approximately 20 million barrels in the past three weeks.

Freight trading has also increased the overall bullish outlook, with grades such as Azeri Light light oil climbing significantly, and CPC Blend crude oil bidding reaching its highest level in four years. The wildfires in Canada and hurricane season in the Atlantic have intensified short-term supply risks. As broker PVM Oil Associates wrote today, "The story of a bull market in crude oil is a convincing one

However, how far oil prices can go is still a serious question mark. Due to sluggish economic growth in some Asian countries and continued expansion of supply from across the Americas, the rate of global inventory decline is expected to significantly slow down in the fourth quarter. Forecasters who expect Brent crude oil prices to skyrocket to $90 per barrel may be disappointed.

Brent crude oil daily chart