Oil Prices Retreat in Asian Trade Amid Global Demand Concerns
In a cautious market, oil prices took a slight dip during Asian trade on Tuesday, following previous gains. The lingering uncertainty surrounding global demand growth prospects and the anticipation of stronger supplies were key factors driving the market sentiment, as reported by Reuters.
At 9:15 a.m. Saudi time, global benchmark Brent crude futures slipped by 0.14 percent to $84.13 per barrel. Similarly, US West Texas Intermediate crude futures fell by 0.17 percent to $80.19 a barrel.
Despite Monday’s 2 percent increase, marking their highest level since April, both benchmarks seemed to be losing their momentum.
According to BoFA commodity and derivatives strategist Francisco Blanch, the focus of the oil market has shifted back to fundamentals, which have been weak for some time. Blanch highlighted that global crude oil inventories and refined product storage in various locations, including the US and Singapore, were on the rise.
The first quarter saw global oil demand growth slow down to 890,000 barrels per day year-on-year, with further deceleration expected in the second quarter, Blanch noted.
China’s oil refinery output also faced a decline of 1.8 percent compared to the previous year in May, due to planned maintenance overhauls and pressure from increasing crude costs, as per statistics bureau data released on Monday.
Market watchers were eagerly anticipating insights on interest rates and the US demand outlook, with several US Federal Reserve representatives scheduled to speak later in the day.
Despite the cautious tone, some analysts remained optimistic about the short-term impact of an extension of supply cuts by the OPEC+ group.
Rystad Energy’s Vice President and Global Lead of Crude Trading Analysis, Patricio Valdivieso, pointed out that the latest guidance from OPEC+ and their unchanged demand growth outlook signal a potential stagnation in oil supply growth for 2024 and a downside risk to production in 2025.
Additionally, recent rebounds in complex refining margins in Europe and Asia provided support to the market, according to Sparta Commodities analyst Neil Crosby.
Refining margins at a typical complex refinery in Singapore averaged $3.60 a barrel for June so far, compared to $2.66 a barrel in May, indicating a positive trend in the refining sector.