Singapore: Oil Prices Dip as Resilient US Economy Points to Higher Borrowing Costs
In a potential blow to demand, oil prices eased on Thursday as resilient US economic activity suggested that borrowing costs could stay higher for longer, according to Reuters.
Market Movements
Brent futures dipped 26 cents or 0.3 percent to $83.34 a barrel, while US West Texas Intermediate crude fell 23 cents or 0.3 percent to $79.00 ahead of US crude oil stockpiles data due later in the day. Both benchmarks are on track for monthly losses, with Brent futures set for a decline of more than 5 percent from last month and WTI poised for a slide of over 3 percent.
Analysis and Forecast
Market strategist Yeap Jun Rong from IG noted, “The broader risk-off environment has translated to some downward pressures on oil prices, which overrides the larger-than-expected drawdown in US crude inventories from the recent API data.”
According to market sources citing American Petroleum Institute figures, US crude oil and gasoline inventories fell last week while distillates rose. Crude stocks were down by 6.49 million barrels, gasoline inventories decreased by 452,000 barrels, and distillates increased by 2.045 million barrels.
Upcoming OPEC+ Meeting
Rising global oil inventories through April may lead OPEC+ producers to extend supply cuts when they meet on June 2. Analysts suggest that OPEC members could potentially extend production cuts till the end of the third quarter to support prices.
Impact of Federal Reserve Actions
Expectations of the Federal Reserve keeping interest rates higher for longer have put pressure on oil markets. Higher borrowing costs can limit funds and consumption, negatively impacting crude demand and prices. The Fed is now expected to cut rates in September at the earliest, compared to a previously anticipated June start.