U.S. crude oil rallies more than 2% to top $80 per barrel, adding to last week’s gains

U.S. crude oil rose more than 2% on June 17 to top $80 per barrel, adding to last week’s gains.

West Texas Intermediate surged nearly 4% last week, snapping a three-week decline and its best weekly performance since early April. Oil prices are rising on expectations summer fuel demand will draw down inventories and tighten the market in the third quarter.

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But Bob Yawger, executive director of energy futures at Mizuho Securities, said the rally is largely speculators covering short positions and “could evaporate at any given moment.”

Yawger said the data out of China, the world’s top crude importer, and gasoline demand from summer driving season need to improve dramatically in order for economic fundamentals to support the move higher.

China posted mixed economic data on June 17, with retail sales in the world’s second-largest economy beating expectations, but industrial output and fixed asset investment missing forecasts.

Uncertainty over China’s economy and growth in oil demand has long hung over the market. OPEC expects the Chinese economy to grow 4.8% this year, acting as the primary driver of crude consumption in the developing world.

The Paris-based International Energy Agency, however, revised its global oil demand outlook lower, citing softness in China. Demand growth in China slowed from 800,000 barrels per day in the first quarter to 95,000 barrels per day in April, according to the IEA.

As a result, global oil demand growth will come in at 960,000 barrels per day this year, about 100,000 barrels per day lower than previously forecast, according to the agency.

Tamas Varga, analyst at oil broker PVM, said the rally last week was “not unreservedly convincing; nonetheless developments over the past five trading sessions did not indicate any souring of investors’ sentiment either.”

Oil stockpiles should fall by 850,000 barrels per day in the third quarter, said Helima Croft, head of global commodity strategy at RBC Capital Markets.

“It’s more of a sense that this market is likely to get tighter as we go deeper in summer,” Croft told CNBC’s “Closing Bell: Overtime” on June 14.