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.
Oil prices continue to decline Wednesday morning after ending the previous session in the negative.
The price of July futures for Brent on London’s ICE Futures Exchange stood at $74.88 a barrel by 8:08 a.m., down $0.03 (0.04%) from the close of the previous session. Those contracts fell $0.32 (0.4%) to $74.91 a barrel on Monday.
The price of WTI futures for June crude oil at NYMEX fell by $0.07, to $70.79 per barrel. The day before contract prices dropped $0.25 (0.4%) to $70.86 per barrel.
The market participants are waiting for data on fuel reserves in the USA for the week that ended on May 12. They forecast a decrease of oil reserves by 0.9-1.3 mln barrels. The Energy Department will publish the official statistics at 5:30 p.m. Wednesday. According to the American Petroleum Institute (API), reserves rose by about 3.7 million barrels.
Earlier, U.S. Energy Secretary Jennifer Granholm said the country intends to start adding to its Strategic Petroleum Reserve (SPR) next month. According to Price Futures Group analyst Phil Flynn, such a move would likely consolidate support for quotations at $70 a barrel, the target price for the US.
In addition, restocking the U.S. will try to “calm down” Saudi Arabia, which, apparently, was dissatisfied with the lack of buying activity from Washington at a time when “the massive outflow of funds from bank deposits gave it a chance,” quoted Flynn to MarketWatch.
Oil quotes are declining in the afternoon on Thursday. The market is assessing the monetary policy of the Bank of England, data on inflation and oil imports in China and waiting for the monthly OPEC report.
The price of July Brent futures on London’s ICE Futures Exchange stands at $76.25 a barrel by 2:25 p.m., down $0.16 (0.21%) from the previous session’s closing price.
The price of futures on WTI crude oil for June on electronic trade of the New York Mercantile Exchange (NYMEX) fell by that time by $0.19 (0.26%), to $72.37 per barrel.
The rate of consumer price growth in China slowed to a 0.1% annualized rate in April from 0.7% in March, data from the State Statistics Office showed. April inflation is the lowest since February 2021. Analysts on average had forecast it would weaken to 0.4%, Trading Economics noted.
In addition, China reduced oil imports in April by 16% year-on-year to 10.6 million barrels per day, adding to fears of a slowdown in its economy.
Traders may also react to the outcome of the Bank of England meeting, which raised the benchmark interest rate by 25 basis points to 4.5% per annum.
The oil market has shown itself to be a “lightning rod for volatility” of late, notes KCM Trade Senior Market Analyst Tim Waterer, whose words are quoted by MarketWatch. In his opinion, extreme price fluctuations cannot be ruled out in this regard, especially given the high sensitivity of oil prices to expectations for global economic growth.
