Oil prices are falling Thursday on data about a significant increase in U.S. inventories and signals that the Federal Reserve (Fed) has not yet ended its cycle of monetary policy tightening, despite a break in the rate hike at its June meeting.
The U.S. central bank kept rates in the 5-5.25 percent annual range at the end of Wednesday’s two-day meeting. Median forecasts from Fed policymakers suggest the rate will be 5.6% by the end of 2023 and 4.6% by the end of 2024.
August Brent crude futures on London’s ICE Futures exchange are at $73.01 a barrel by 8:05 a.m. Thursday, down $0.19 (0.26%) from the previous session’s closing price. Those contracts fell $1.09 (1.5%) to $73.2 a barrel on Wednesday.
The price of WTI futures for July oil fell by $0.17 (0.25 percent) to $68.1 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX) by that time. The contract value fell by $1.15 (1.7%) to $68.27 per barrel at the end of previous session.
The pressure on the market caused by an increase in stocks is exacerbated by risks of weakening demand as a result of Federal Reserve policies, said Mizuho Bank Ltd. Vishnu Varathan, cited by Market Watch.
U.S. commercial oil inventories rose 7.92 million barrels to 467.12 million last week, the Energy Department said Wednesday. Commodity gasoline reserves rose 2.11 million barrels and distillates rose 2.12 million barrels.
Stocks at the Cushing terminal, where Nymex-traded crude is stored, rose by 1.5 million barrels last week, to a two-year high.
Oil prices are weakly rising on Wednesday after a jump of more than 3% in the previous session.
The previous day, the growth of quotations was contributed by the reduction of one of the key interest rates of the People’s Bank of China (PBOC), as well as reports that Beijing is preparing additional measures to stimulate economic activity in the country.
August Brent crude futures on London’s ICE Futures Exchange stood at $74.45 a barrel by 8:10 a.m. Wednesday, up $0.16 (0.22%) from the previous session’s close. Those contracts rose $2.45 (3.4%) to $74.29 a barrel on Tuesday.
The price of WTI futures for July oil grew by $0.08 (0.12%) to $69.5 per barrel at electronic trades of New York Mercantile Exchange (NYMEX) by that time. Contracts rose $2.3 (3.4%) to $69.42 a barrel in the previous session.
“China’s move toward new stimulus provides support for the oil market,” said Schneider Electric analyst Robbie Fraser, quoted by Market Watch. – The Chinese central bank’s key interest rate cut gives hope that policy easing could translate into stronger economic growth this year.”
As reported, the NBK on Tuesday cut the seven-day reverse repo rate to 1.9 percent from 2 percent.
The oil market was also supported by Bloomberg’s report that the U.S. authorities plan to replenish the strategic oil reserve (SPR) by 12 million barrels this year.
Traders’ attention on Wednesday is directed to the meeting of the Federal Reserve. Investors expect that a significant weakening of inflation will allow the Fed to pause in the cycle of tightening monetary policy and keep the benchmark interest rate unchanged (at 5-5.25%) at the June 13-14 meeting, notes Market Watch.
Oil prices continue to fall on Wednesday morning amid expectations of record production in the U.S. this and next year.
The cost of August futures for Brent on London’s ICE Futures Exchange is $75.8 a barrel by 8:15 a.m., down $0.49 (0.64%) from the previous session’s closing price. The contract fell $0.42 (0.6%) to $76.29 a barrel on Tuesday.
July futures on WTI grew by $0.44 (0.61%) to $71.3 per barrel at NYMEX by that time. At the end of previous session the contracts fell by $0.41 (0.6%) to $71.74 per barrel.
The U.S. Energy Department raised expectations for domestic oil production (excluding other liquid hydrocarbons) in 2023 from 12.53 million bpd to 12.61 million bpd, the agency said in a monthly forecast.
The forecast is 720,000 bpd higher than the 2022 result of 11.89 million bpd. It is also 310,000 bpd better than the last average annual record for U.S. crude oil production set in 2019 at 12.3 million bpd.
The agency also raised its 2024 production forecast by 80,000 bpd to 12.77 million bpd.
In addition, the U.S. Energy Information Administration (EIA) will release its weekly report on oil, gasoline and distillate inventories on Wednesday at 5:30 p.m. Moscow time. According to the American Petroleum Institute (API), oil inventories for the week ended June 2 decreased by about 1.7 million barrels. The consensus forecast by Trading Economics suggests an increase of 1.5 million barrels.
Oil prices continue to decline Wednesday after hitting lows over the past month the day before.
July Brent futures on London’s ICE Futures Exchange stood at $73.35 a barrel by 8:05 a.m. Wednesday, down $0.19 (0.26%) from the previous session’s close. Those contracts fell $3.53 (4.6%) to $73.54 a barrel on Tuesday.
July WTI futures on NYMEX fell by $0.24 (0.35%) to $69.22 per barrel by that time. The contracts fell by $3.21 (4.4%) to $69.46 a barrel at the end of the last session.
According to Dow Jones Market Data, both grades closed the previous day at their lowest level since May 4.
Traders’ attention is still directed to the situation with the U.S. debt ceiling. On Wednesday, it’s expected to vote in the House of Representatives on the draft agreement reached by President Joe Biden and the Speaker of the Lower House of Congress, Republican Kevin McCarthy, after which the document will go to the Senate.
In addition, the market is assessing macroeconomic data from China. The published May official value of purchasing managers index (PMI) in the processing industry didn’t justify the 49.4 points forecast of analysts, having decreased to the minimum for five months of 48.8 points from 49.2 points in April.
The weak statistics strengthened fears of a slowdown in economic growth in China, the world’s top oil importer, Trading Economics said.
Oil prices are rising Monday morning amid optimism about an increase in the U.S. national debt ceiling.
July Brent futures on London’s ICE Futures exchange stood at $77.53 a barrel by 8:14 a.m., up $0.58 (0.75%) from the previous session’s close. Last Friday those contracts rose $0.69 (0.9%) to $76.95 a barrel.
July WTI futures traded on NYMEX rose by $0.65, to $73.32 per barrel. The contract value grew by $0.84 (1.2%) to $72.68 per barrel at the end of previous session.
Brent contract grew 1.8% and WTI gained 1.4% at the end of the previous week.
Over the weekend, US President Joe Biden said he had reached a budget agreement with House Speaker Kevin McCarthy. According to him, this prevents “the worst possible crisis,” that is, the possibility of a default on U.S. government debt.
Negotiators are finalizing the text of the bill, which will then go to the House and Senate.
It is expected that trading volume on Monday may be lower than usual due to the fact that the USA and UK stock exchanges are closed in connection with the public holidays.
Meanwhile, the number of active oil rigs in the United States fell by five last week to 570, oilfield services company Baker Hughes said. That’s the lowest since March 2022.
Oil prices are falling sharply on Thursday afternoon amid a strengthening U.S. dollar and after Wednesday’s release of data on a significant reduction in U.S. inventories.
July Brent crude futures on London’s ICE Futures exchange stood at $76.94 a barrel by 2:26 p.m. Thursday, down $1.42 (1.81%) from the previous session’s closing price.
The price of WTI crude futures for July on the New York Mercantile Exchange (NYMEX) electronic trading was down $1.46 (1.96%) to $72.88 a barrel by that time.
The DXY index, which shows the value of the U.S. dollar relative to the six major world currencies, is up 0.2% in trading, making oil less attractive to holders of other currencies.
Meanwhile, the oil and gas industry is expected to increase upstream investment by 7% in 2023, to more than $500 billion, the International Energy Agency (IEA) points out in its annual World Energy Investment Outlook.
“Many major oil and gas companies have announced expansion of investment programs due to record revenues,” the IEA notes. – However, due to uncertainty about relatively long-term demand, cost concerns, and calls from many investors and owners to focus on profitability as opposed to production growth, only the major oil state companies in the Middle East will spend much more in 2023 than in 2022, and this is the only part of the sector where investment will exceed pre-pandemic levels.”
The day before, we also learned that U.S. oil inventories fell by 12.456 million barrels last week. This is the sharpest drop since November 2022, Trading Economics wrote.
Gasoline reserves fell by 2.05 million barrels and distillates by 561,000 barrels.
Experts polled by S&P Global Commodity Insights expected oil reserves to decrease by 500 thousand barrels, gasoline reserves to decrease by 2.1 million barrels and distillates reserves to decrease by 600 thousand barrels.
