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 strengthened their rebound Monday afternoon as investors assessed the outcome of last weekend’s OPEC+ meeting.
Futures on Brent crude oil for August at London’s ICE Futures Exchange rose by $1.37 (1.8%) to $77.5 per barrel by 2:24 pm.
WTI July futures traded on the NYMEX rose by $1.37 (1.91%) to $73.11 per barrel by that time.
Last Friday, Brent gained 2.5% and WTI gained 2.3%.
OPEC+ countries at a meeting in Vienna on June 4 decided to reduce oil production quotas by another 1.4 mln bpd – to 40.46 mln bpd. The states voluntarily reducing production since May by 1.66 million bpd will extend the cuts for the entire year 2024.
Meanwhile, Saudi Arabia will reduce production by an additional 1 million b/d as early as this year and will think about a possible extension of such measure every month depending on the market situation to stabilize it.
“Saudi Arabia is more active than most other OPEC members in seeking to maintain oil prices above the $80 a barrel mark because it is important to the country’s budget balance for this year,” DBS Bank analyst Survo Sarkar wrote.
Rystad Energy, a consultancy, estimates that additional production cuts by the kingdom will increase the global market deficit to 3 million bpd in July, which will support prices in the coming weeks.
Oil prices rise weakly on Tuesday as traders continue to follow negotiations to raise the U.S. borrowing limit.
Negotiations between U.S. President Joe Biden and Republican House Speaker Kevin McCarthy on Monday were productive, according to both sides, but no agreement was reached. Meanwhile, the deadline for raising the debt ceiling is approaching: Treasury Secretary Janet Yellen said the day before that her agency’s funds are “highly likely” to run out in early June and possibly even by June 1.
“The pending national debt limit issue is taking a toll on the mood of oil traders,” said Ricardo Evangelista, chief analyst at ActivTrades.
“If the issue is not resolved soon, the U.S. Treasury will be left without funds and unable to meet its obligations, and this scenario could trigger a crisis whose scale is unpredictable,” Market Watch quotes the expert as saying.
The cost of July futures for Brent crude oil on London’s ICE Futures exchange is $76.13 a barrel by 8:15 a.m. on Tuesday, up $0.14 (0.18%) from the previous session’s closing price. Those contracts rose $0.41 (0.5%) to $75.99 a barrel on Monday.
The price of WTI futures for July oil grew by $0.16 (0.22%) up to $72.21 per barrel at electronic trades of NYMEX by that time. At the end of previous session the contracts value grew by $0.36 (0.5%) up to $72.05 per barrel.
Since the beginning of the current year, oil prices fell by about 10% against the slower-than-expected recovery of the Chinese economy after the lifting of quarantine restrictions. Other factors restraining the oil market upturn include the ongoing tightening of monetary policy by the Federal Reserve System and the continued high volume of Russian oil exports.
Oil prices are falling on Thursday after a strong rise in the previous session.
The cost of July futures for Brent on London’s ICE Futures Exchange stood at $76.73 a barrel by 8:15 a.m. Thursday, down $0.23 (0.3%) from the close of the previous session. Those contracts rose $2.05 (2.7%) to $76.96 a barrel on Wednesday.
The price of WTI futures for June oil fell by $0.23 (0.32%) to $72.6 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX) by that time. The contract value grew by $1.97 (2.8%) to $72.83 per barrel at the end of previous session.
Support to the market on Wednesday was given by the statements of U.S. President Joe Biden, who again expressed optimism about negotiations on the state debt ceiling issue, notes Market Watch.
“I am confident that we will have an agreement and the U.S. will not default,” Biden said while speaking at the White House.
“Investors’ hopes that the U.S. government debt limit problem will be resolved soon are increasing,” notes StoneX analyst Fawad Razakzada. – Biden’s statement led to an increase in appetite for risk in world markets, including oil”.
However, the market was constrained by the U.S. Department of Energy data which showed an increase in oil inventories in the country for the second week in a row.
Last week commercial inventories in the U.S. rose by 5.04 million barrels, a record high over the past 12 weeks. Analysts had expected a decline of 2 million barrels.
Gasoline inventories declined by 1.38 million barrels, while distillate stocks increased by 80,000 barrels. Experts forecasted reduction by 2 million barrels and 1.5 million barrels respectively.
