Oil prices are down on Thursday after a strong rise the day before on data on a sharp decline in U.S. inventories.
The value of August Brent futures on London’s ICE Futures Exchange stood at $73.57 a barrel by 8:10 a.m. Thursday, down $0.46 (0.62%) from the previous session’s close. Those contracts rose $1.77 (2.5%) to $74.03 a barrel on Wednesday.
The price of WTI crude futures for August at NYMEX fell by $0.39 (0.56%) to $69.17 per barrel by that time. The day before the stocks went up $1.86 (2.8%) to $69.56 per barrel.
Last week crude inventories in the U.S. fell by 9.6 million barrels to 453.69 million barrels, according to the Energy Department. Experts polled by S&P Global Commodity Insights had on average forecast a less significant decline of 4.8 million barrels.
“The decline in U.S. inventories is largely due to an increase in oil exports,” said DTN chief analyst Troy Vincent, quoted by Market Watch. – This is occurring despite a decline in U.S. refinery activity.”
Stocks at the terminal in Cushing, which stores crude oil traded on the NYMEX, increased over the past week by 1.21 million barrels, according to the Energy Department.
The oil market ended the second quarter of 2023 in the negative due to the slower-than-expected recovery of the Chinese economy, as well as fears of recession in the U.S. and Europe amid a tightening of monetary policy by the Federal Reserve and the European Central Bank.
Fed Chief Jerome Powell said at the ECB forum in Sintra on Wednesday that most U.S. central bank leaders see the possibility of at least two more hikes in the prime rate.
Oil prices continued to fall on Friday and ended the week lower amid continued monetary tightening by global central banks.
The Bank of England and Norwegian Central Bank raised their benchmark rates 50 basis points (bps) the previous day, while the Swiss National Bank raised them by 25 bps.
In addition, Federal Reserve (Fed) Chairman Jerome Powell made it clear that the U.S. Central Bank may raise the rate twice more this year.
“Global central banks continue to push for slower inflation, even as the measures they are taking to do so are pushing the economy into recession, and the oil market is responding accordingly,” notes CMC Markets U.K. analyst Michael Hewson.
“Sharper-than-expected rate hikes by the Bank of England and the Norwegian central bank, as well as hawkish signals from the Fed, are negatively affecting traders’ expectations for oil demand prospects,” Hewson is quoted by Market Watch.
The price of August futures for Brent crude oil on London’s ICE Futures exchange is $73.42 a barrel by 8:15 a.m. on Friday, down $0.72 (0.97%) from the previous session’s closing price. Those contracts fell $2.98 (3.9%) to $74.14 a barrel on Thursday.
The price of WTI crude futures for August at NYMEX fell by $0.73 (1.05%) to $68.78 per barrel by that time. The day before these contracts fell by $3.02 (4.2%) to $69.51 per barrel.
Data of U.S. Department of Energy issued on Thursday showed a reduction of commercial oil reserves in the country last week by 3.83 mln barrels to 463.29 mln barrels. Experts on average had forecast a decline by 450,000 barrels.
Gasoline stocks in the states last week rose by 479,000 barrels and distillates by 434,000 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 continue to decline Tuesday afternoon on concerns over the U.S. government debt ceiling.
Brent crude futures for July on London’s ICE Futures exchange stood at $76 a barrel by 1:44 p.m. Tuesday, down $1.07 (1.39%) from the previous session’s close.
The price of WTI crude futures for July on the electronic trading of the New York Mercantile Exchange (NYMEX) was down by that time by $0.84 (1.16%), to $71.83 a barrel.
On Wednesday, the U.S. House of Representatives will vote on the debt ceiling agreement before it goes to the Senate.
Active opponents of the agreement in both houses of parliament could slow its passage, The Wall Street Journal noted. Some conservative lawmakers have already said they would not support the deal because it does not sufficiently limit budget spending, while progressive Democrats believe the spending cuts are excessive.
“This uncertainty is keeping oil prices up,” said Hargreaves Lansdown analyst Suzanne Streeter, whose words are cited by Barron’s.
In addition, traders expect another OPEC meeting on Sunday.
The organization will not take any further steps until it sees the effect of lower production quotas, according to ANZ.
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.
