The trajectory of global oil stocks is as important as OPEC+ supply cuts and macro headwinds
Oil prices fell on Wednesday. Oil reversed some of its gains as concerns over the global economic slowdown weighed on market sentiment, although Saudi Arabia and Russia announced they would extend and deepen production cuts.
Brent crude fell 46 cents, or 0.6%, to $75.79 a barrel at 0418 GMT after hitting $1.60 on Tuesday.
Crude futures for West Texas Intermediate (WTI) futures were up $1.08, or 1.6%, at $70.87 a barrel at Monday’s close. There was no settlement as Tuesday was Independence Day in the USA.
Oil prices remain under pressure due to the slowdown in the global economy and ongoing concerns about a further rise in interest rates in the US and Europe. The market is expected to move back and forth for a while, focusing on economic indicators in China and the monetary policy of central banks.
A survey showed that China’s service activity expanded at its slowest pace in five months in June as weakening demand suppressed the pace of recovery after the “pandemic.”
The market also awaits the minutes of the Federal Open Market Committee’s (FOMC) June 13-14 meeting later Wednesday for more clues about the US central bank’s outlook.
Production cuts announced by Saudi Arabia and Russia on Monday only briefly boosted the market amid weak demand and concerns about further rate hikes that could trigger the economic downturn and further reduce fuel demand.
OPEC+, which consists of the Organization of the Petroleum Exporting Countries and its allies, including Russia, which pumps about 40% of the world’s crude oil, has been reducing oil production since November in the face of falling prices.
Russia and Algeria have volunteered to cut their August output and export levels by 500,000 barrels a day, while Saudi Arabia, the world’s largest exporter of crude oil, said on Monday it will voluntarily extend its 1 million bpd production cut through August.
However, investors remain concerned about oil demand after employment surveys showed a decline in global factory activity due to sluggish demand in China and Europe.
Traders will look for clues to demand, with oil inventories from the American Petroleum Institute (API) to be released late Wednesday and EIA government data on Thursday, both delayed by one day due to the US holiday.
U.S. crude inventories were expected to fall by about 1.8 million barrels in the week to June 30, analysts estimated; this marks the third consecutive week of declines.
The trajectory of global oil stocks is as important as OPEC+ supply cuts and macro headwinds.
