Oil Slumps Despite Positive US Demand Outlook
Despite a significant reduction in US stockpiles, as indicated by the Energy Information Administration’s (EIA) most recent report, crude oil prices continued to fall on Friday. Brent crude dropped by 0.06% to $81.83 per barrel from the closing price of $81.88 per barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $77.78 per barrel at the same time, a 0.16% fall from the previous session that closed at $77.91 per barrel.
US commercial crude oil inventories decreased by 4.2 million barrels during the week ending May 24, against the market expectation of a fall of around 1.6 million barrels, according EIA data.
The EIA also found that US gasoline inventories increased by about 2 million barrels. EIA data indicating a rise in US crude oil production by 6,000 barrels per day (bpd) to around 13.52 million bpd eased supply concerns and put downward pressure on oil prices.
The bearish trend in the global commodity market has persisted amidst geopolitical conflict.The Organisation of Petroleum Exporting Countries (OPEC) and Allies (OPEC+) will meet this weekend and are expected to extend their additional voluntary supply cuts.
Anything less will disappoint the market, ING commodities strategists said in a note. Oil prices came under pressure yesterday, despite a supportive EIA weekly inventory report.
Instead, the oil market got caught up in the broader weakness in the complex, which saw Brent settle more than 2% lower on the day. The OPEC+ meeting scheduled for Sunday will also likely see some traders taking risks off the table, ING said.
At the meeting, investors will discover if the group will extend its 2.2 million bpd voluntary production cut until the end of the year. In the current scenario, it is anticipated that the group has reduced supplies by 5.8 million bpd, which corresponds to roughly 5.7% of total demand worldwide.
The market expects OPEC+ to fully roll over its additional voluntary supply cuts into the second half of the year, ING strategists said. Anything less will put further pressure on prices in the short term. It would be more difficult for the group to surprise to the upside.
Experts said agreeing on deeper cuts would be challenging, particularly when a handful of producers are already producing above their target levels.
However, there are reports that members are considering extending cuts into 2025. A full rollover of cuts is important for sentiment, but fundamentally, it is not needed as it will push the oil market into a deep deficit over the summer, a peak demand period.
Oil price dynamics are still being impacted by market caution ahead of the US Federal Reserve’s announcement regarding the start date of interest rate reductions, with careful attention being paid to Fed officials’ remarks.
Analysts believe that the core personal consumption expenditures (PCE) price index data, which the Fed considers an inflation indicator in the US, may increase market volatility.
Conversely, data that showed a downward revision in the US GDP on Thursday increased analysts’ expectations that the Fed will cut interest rates this year, curtailing further price falls. #Oil Slumps Despite Positive US Demand Outlook Moody’s Downgrades Uganda’s Ratings, Changes Outlook to Stable
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