On Wednesday, oil prices experienced a decline from their three-month highs reached the previous day. The drop was influenced by industry data indicating an expected increase in US crude stockpiles. However, the losses were somewhat limited due to indications of a tighter global supply and optimism surrounding China’s economic stimulus efforts. Specifically, Brent crude futures fell by 32 cents (0.4 percent) to reach $83.32 a barrel, while US West Texas Intermediate (WTI) crude dropped by 28 cents (0.4 percent) to reach $79.35 a barrel. Read More Business News on our website.
The subsequent rise in US crude inventories in the previous week led to selling, as noted by Hiroyuki Kikukawa. Additionally, investors adjusted their positions ahead of the US Federal Reserve’s monetary policy decision.
The American Petroleum Institute reported a 1.32 million barrel increase in US crude stocks for the week ending on July 21, which differed from analysts’ expectations of a 2.3 million barrel drawdown. Gasoline inventories decreased by approximately 1.04 million barrels, while distillate inventories rose by about 1.61 million barrels. Official US government data on inventories was scheduled to be released on Wednesday.
Oil prices had surged on Tuesday to their highest levels since April 19, driven by concerns about tighter supplies and reassurances from Chinese authorities about supporting their economy, which is the world’s second-largest.
The market is currently balancing between the prospects of a tighter global supply and worries about potential demand slowdown due to a global economic slowdown. However, it is anticipated that oil prices will test higher levels during the summer driving season when demand typically increases. The forecast is that WTI could reach mid-$80 levels in the July-August period.
The Federal Reserve’s policy meeting, which started on Tuesday, is expected to conclude with a 25 basis-point rate hike, according to most market participants.
The recent four-week streak of gains in oil prices can be attributed to anticipated supply reductions by the Organization of the Petroleum Exporting Countries (OPEC) and its allies. Notably, Saudi Arabia’s oil exports in May were nearly 40 percent lower compared to the same period the previous year, as reported by the latest government data.
China, being the world’s second-largest oil consumer, pledged to intensify its economic policy support. The International Monetary Fund slightly raised its 2023 global growth estimates, acknowledging resilient economic activity in the first quarter but also warning about persistent challenges that could dampen the medium-term outlook.