But plenty of bullish signs cloud trading outlook: File Image/Pixabay
Mixed signals about demand was the main culprit in causing a retreat in crude prices on Wednesday, and contributing to what may turn out to be the first monthly decline for the commodity since November.
An Energy Information Administration report showed that although U.S. crude stocks fell as fuelmakers increased gasoline runs, demand on a four-week rolling average fell to the lowest seasonal level since 2014 (excepting 2020); this combined with U.S. Gross Domestic Product contracting by 1.6 percent for the first quarter versus the 6.9 percent growth in the fourth quarter of last year clouded outlook for traders.
It is said that with the 1.6 percent contraction in the first quarter, the economy will technically slip into a recession if it does not return to positive growth by the end of the second quarter, which will come Thursday.
John Kilduff, founding partner, Again Capital
There's a mixed bunch of things going on
As a result, West Texas Intermediate settled down $1.98 to $109.78 per barrel, and Brent settled down $1.72 to $116.26 per barrel.
Rebecca Babin, senior energy trader at CIBC Private Wealth Management, remarked, "Demand is currently below seasonal averages but the key thing for crude is that it is still growing."
John Kilduff, founding partner at Again Capital, added, "There's a mixed bunch of things going on, and the price action is telling that."
Globally, there is no indication of waning demand: for example, Dated-to-Frontline swaps, a measure of how tight North Sea supplies are, jumped to their highest level on record to nearly $6 per barrel.
Also, it seems organizations the world over are attempting to guard against another price surge: it was reported by traders on Wednesday that from Disney to truckers and airlines, a growing number of companies are responsible for causing the busiest spell of consumer hedging in years.
However, anyone still holding out hope that entities such as the Organization of the Petroleum Exporting Countries (OPEC) would help top up supply would have presumably been disappointed on Wednesday, when the cartel concluded the first day of a meeting addressing internal matters but failed to discuss oil policy.
The group discussed a proposal to have an in-person meeting in Vienna in December, delegates said, and it is hoped that the anticipated ratification of a supply increase for August will be debated tomorrow.