Oil prices fell on Wednesday after industry data showed an increase in U.S. crude and fuel inventories and as the U.S. dollar strengthened, suggesting oil demand is under pressure.
Brent crude futures fell $1.11, or 1.3 percent, to $82.20 a barrel. U.S. West Texas Intermediate crude futures fell $1.15, or 1.5 percent, to $77.73 a barrel.
Both benchmarks fell slightly in the previous session amid signs of easing tightness in supply and weakening global oil demand from Tuesday’s Energy Information Administration forecast report.
Market sources, citing figures from the American Petroleum Institute, said U.S. crude inventories rose by 509,000 barrels in the week ended May 3. Gasoline and distillate inventories have also risen, they added.
The API figures released overnight were somewhat bearish due to increased inventories in both crude oil and products… Concern about weaker-than-usual demand for gasoline in the United States and this increase in inventories affected the immediate collapse of gasoline
Official U.S. government inventory data is due and analysts expect U.S. crude inventories to fall by about 1.1 million barrels last week. A stronger US dollar, which increases the cost of buying oil, has also affected holders of other currencies.
Shedding the current geopolitical trigger leaves the market staring at a world of steady inflation in the US offset by interest rates that not only keep the US dollar high, but also make any type of commodity trading more expensive.
The geopolitical risks of oil prices are dissipating as fears of further escalation of the conflict recede. They eliminated the $4 risk premium on oil prices for the third quarter as a result, but still see strong fundamentals supporting Brent prices at around $90 a barrel during the summer.
Oil prices fall as inventories rise and markets downlook
Crude oil futures fell more than 1% on Wednesday as the market fell due to rising inventories, although prices could rise later this year as demand increases during the summer driving season.
“Oil market indices have become softer in recent weeks, and prices have fallen from the last peak.” “The oil market is not tight right now, but we expect seasonal strength in the coming months.”
The short-term outlook for the oil market looks bearish, weighed down by higher inventory levels and downward revisions to demand expectations. With the imminent OPEC+ meeting and the prospect of an extension of production cuts, traders should remain alert for any policy shifts that could affect market trends. Expect volatility to continue and the possibility of further price declines if current trends continue.
Oil prices have fallen 8% since their April high when traders raised prices on fears of Iran and Israel going to war. Investors have largely sold the war premium since then, with Morgan Stanley removing the $4 per barrel risk from its oil price forecast for this year.
However, the outlook for summer oil demand looks strong and OPEC+ is likely to extend production cuts until the end of the year, according to Morgan Stanley. That would support a deficit of 2 million bpd in the third quarter and Brent prices at $90 over the summer.
The cautious outlook on supply cuts from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) ahead of the June 1 policy meeting also weighed on markets. Russian Deputy Prime Minister Alexander Novak said on Tuesday that there were no discussions on increasing oil production by OPEC+.
Oil prices fall as Iran production expected to increase
When the world talks about falling oil prices, it is a thorny topic that concerns many stakeholders, whether they are countries whose economies rely heavily on oil, energy companies, or even ordinary consumers monitoring the impact of these fluctuations on the prices of fuel and oil-derived products. With expectations of an increase in production from Iran, a country considered one of the largest oil producers in the world, discussions about the future of oil prices are becoming more intense and complex. To understand the current situation, we must first look at the role of oil in the global economy.
Oil prices fell more than 1.5% in the European session on Wednesday, with U.S. West Texas Intermediate crude prices hitting their lowest levels in almost two months. Markets are not responding well that Iran plans to add between 300,000 and 400,000 bpd to its production this year. The confirmation came from Iranian Oil Minister Javad Oji, and means chaos for the next OPEC meeting, where prolonging production cuts will be the subject of discussion.
Meanwhile, the US dollar index (DXY) rose this week, recording gains for the third consecutive day, in joint cooperation with the USD/JPY pair, with the Japanese yen (JPY) already falling by half of last week’s movement. Japanese interventions over the past two weeks. The underlying bullish tone around the US dollar may continue to weigh on crude oil prices
Oil prices fall further with no risk of interruption of oil production from the Middle East. Since traders are tired of pricing at risk premium for something that hasn’t happened yet, this sees some capitulation in the price of oil as only $75.28 seems to be the only strong support level left to refrain from oil falling to $70.00.
