Oil Prices Fall in Asian Trade Amid Rising Inventories and Supply Concerns
In a recent turn of events, oil prices experienced a downward spiral in Asian trade as industry data unveiled a surge in crude and fuel inventories in the US, signaling weak demand. Additionally, cautious supply expectations loomed ahead of an upcoming OPEC+ policy meeting next month, according to Reuters.
Price Movements
Brent crude oil futures took a hit, dropping by 57 cents, or 0.69 percent, to reach $82.59 a barrel by 9:45 a.m. Saudi time. On the other hand, US West Texas Intermediate crude futures also saw a decline of 53 cents, or 0.68 percent, landing at $77.85 a barrel.
Market Sentiments
The previous session witnessed a slight dip in both benchmarks, attributed to signs of easing supply constraints and a decrease in global oil demand as per an Energy Information Administration forecast report released on Tuesday.
Inventory Data
Market sources revealed that US crude stocks surged by 509,000 barrels in the week ending May 3, with gasoline and distillate fuel inventories also experiencing an increase, based on American Petroleum Institute figures.
Expert Analysis
ING analysts commented on the situation, stating, “API numbers released overnight were moderately bearish due to stock builds in both crude and products. Concern over weaker-than-usual US gasoline demand and this stock-build have weighed on the prompt RBOB gasoline crack.”
Supply Cut Expectations
Anticipation surrounding supply cuts from OPEC+ members before the June 1 policy meeting added further pressure to the markets. ING analysts noted, “Expectations are that members will extend their additional voluntary supply cuts beyond the second quarter of this year.”
Geopolitical Factors
The prospect of a ceasefire in Gaza also impacted oil prices, with some analysts suggesting a decline in the risk premium associated with oil. Economist Bill Weatherburn from Capital Economics mentioned, “Prices continue to be supported by OPEC+ production cuts but we suspect that members will gradually unwind these cuts from July, pushing oil prices lower.”
US Involvement in Gaza
The US has been actively engaged in negotiations for a ceasefire in Gaza, aiming to bridge the gap between Israel and Hamas. US Central Intelligence Agency Director Bill Burns is scheduled to travel to Israel for discussions with top officials.
Analyst Insights
Despite the overall price decline, some analysts believe that short-term demand remains robust, offering a cushion to the market. Sparta Commodities analyst Neil Crosby shared, “Much talk of economic run cuts in recent weeks is overblown in our opinion, with margins still healthy enough.”