Oil Prices Near Four-Month Lows Amid OPEC+ Decision
In a volatile market, oil prices remained near four-month lows in Asia on Wednesday. This comes after an OPEC+ decision to increase supply later this year and a rise in US crude and refined products stocks, as reported by Reuters.
Brent crude futures saw a slight increase of 1 cent, reaching $77.53 a barrel by 9:38 a.m. Saudi time. Meanwhile, US West Texas Intermediate crude futures dropped 2 cents to $73.23 a barrel.
Both contracts experienced a significant drop on Tuesday, hitting their lowest settlement levels since early February. They had also declined by around $3 a barrel on Monday.
The downward trend followed the announcement from the Organization of the Petroleum Exporting Countries and its allies regarding plans to boost supply from October, despite recent indications of weakening demand growth.
According to RBC Capital’s head of commodities research, Helima Croft, “Brent remains under pressure as a corner of the market continues to view OPEC’s proposed taper timeline for the voluntary cuts as a binding commitment to increase by 500,000 barrels per day in Q4 2024 irrespective of the fundamental oil outlook or sentiment come summer’s end.”
However, Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, assured that OPEC+ would pause the unwinding of cuts or reverse them if demand wasn’t strong enough to absorb the barrels.
The intention, as highlighted by Croft, has always been to gradually reintroduce the barrels into the market, avoiding a sudden supply surge that could disrupt the market.
Analysts at ING led by Warren Patterson mentioned that crude oil supply is expected to tighten in the third quarter. They also emphasized that OPEC+’s plans to unwind supply cuts will only begin in October.
Despite the recent market fluctuations, they stated, “Therefore, we believe the scale of the sell-off at the front end of the forward curve is overdone.”
In the US, crude oil, gasoline, and distillate stocks saw an increase last week, according to sources citing American Petroleum Institute figures.
The API reported a rise of over 4 million barrels in crude stocks for the week ended May 31, contrary to analysts’ expectations of a 2.3 million-barrel decline.
Independent energy analyst Tim Evans described the crude figures in the API report as a “clear bearish surprise.”
Gasoline stocks also surged by more than 4 million barrels, double the build anticipated by analysts.
Market watchers are eagerly awaiting the official stockpiles data from the US Energy Information Administration, set to be published on Wednesday at 1430 GMT.
The data from last week is of particular interest as it reflects fuel usage around the Memorial Day holiday, marking the beginning of the US driving season.