Multiple Signs Of Strong Demand Signs Not Enough To Prevent Weekly Losses For Oil

by Ship & Bunker News Team
Friday May 24, 2024

Inflation-related demand worries consistently eclipsed various signs of strong global demand this week, with oil prices except for Friday registering losses and the commodity heading for a weekly loss.

As of 1740 GMT, Brent on Friday rose 87 cents to $82.22 per barrel and West Texas Intermediate rose 93 cents to $77.80, the rises mostly attributed to the start of the summer travel season this weekend.

Tim Evans, an independent energy analyst, summarized the mindset of traders by remarking, "Petroleum prices remain soft in early Friday dealings, with worries over Federal Reserve interest rate policy and last week's bump in U.S. crude oil inventories still weighing on market sentiment."

Tamas Varga, analyst at PVM, added, "Macroeconomic developments have been failing to provide meaningful support for oil….it is a fair bet that rate cuts are slipping away."

Ironically, there was plenty of cause for market optimism this week: the Energy Information Administration reported U.S. gasoline demand at its highest since November (a promising sign for the summer driving season).

Also, UBS forecasted the oil market going into deficit and predicted Brent will climb to $91 per barrel in coming months; it also thinks demand will grow at a healthy rate of $1.5 million barrels per day (bpd) for this year, which is above the long-term 1.2 million bpd growth rate.

It fell upon Bloomberg to provide a bird's eye view of the state of the oil market on Friday: "Brent is still up about 6 percent up this year in part due to OPEC+'s 2 million barrels a day of production cuts as well as persistent geopolitical risks; still, oil has fallen since mid-April as the conflict in the Middle East has yet to disrupt crude supplies."

Next up for traders' consideration is the June 2 meeting of the Organization of the Petroleum Exporting Countries (OPEC) where discussions will take place about whether to extend voluntary oil output cuts.

Tthis caused Varga to state "Next week's OPEC meeting is widely expected to roll over the current production ceiling, especially now that oil prices are in a relentless downtrend.

"But it would probably not be enough to unambiguously brighten the mood, simply because there is nearly 6 mbpd of supply cushion attached to the seemingly oversupplied market."