The Oil Market Rollercoaster: Stability Amidst Uncertainty
In the fast-paced world of oil trading, stability is a rare sight. But on Friday, oil prices managed to hold steady as investors digested the latest news from the US Federal Reserve regarding interest rates and grappled with persistent inflation concerns. As reported by Reuters, signs of increasing US fuel demand provided some much-needed support to the market.
At 6:15 a.m. Saudi time, Brent crude futures inched up by 2 cents to $81.38 a barrel, while US West Texas Intermediate crude futures dipped by 1 cent to $76.86.
The previous day saw both benchmarks hitting multi-month lows, with Brent crude futures closing at their weakest point since January and US crude futures reaching a three-month low.
For the week, Brent futures were looking at a decline of over 3 percent, while WTI futures were on track for a slide of nearly 4 percent from the previous week, highlighting the ongoing macroeconomic challenges facing the US economy.
According to Priyanka Sachdeva, a senior market analyst at Phillip Nova, the pessimistic sentiment surrounding demand, fueled by the Fed’s hawkish stance on rates and the possibility of prolonged high rates, weighed heavily on oil prices throughout the week.
Recent minutes released from the Fed’s policy meeting revealed discussions among policymakers about the adequacy of current interest rates in curbing inflation. While some officials expressed readiness to raise borrowing costs if inflation spikes, Fed Chair Jerome Powell and others have downplayed the likelihood of further rate hikes.
The fear of higher rates dampening economic growth and reducing fuel demand loomed large over the market, but a ray of hope came in the form of increasing US gasoline demand. The Energy Information Administration reported that gasoline demand in the US had reached its highest level since November, providing some respite to the market as US drivers play a significant role in global oil demand.
With the Memorial Day holiday weekend approaching, marking the beginning of the US summer driving season, analysts from ANZ emphasized the importance of this period in driving global demand growth recovery.
As anticipation builds for the upcoming OPEC+ meeting on June 1, where discussions on extending voluntary oil output cuts of 2.2 million barrels per day are expected, caution prevails in the market. ANZ analysts highlighted the hesitancy to take aggressive positions before clarity emerges from the meeting regarding supply policy.