Surplus Concerns Eclipse Israel/Hamas Peace Talks As Oil Touches 7-Week Low

Meanwhile, Big Oil reports mixed Q1 results: File Image/Pixabay 

Oil on Thursday briefly hit  a seven-week low due to a significant build in U.S. stockpiles and the perception of waning demand, on the heels of the Federal Reserve in the previous session holding interest rates steady.

Key to traders’ concerns were that keeping interest rates higher for longer would make oil more expensive and thus impact demand.

The Energy Information Administration reported that U.S. commercial crude inventories, which exclude the strategic petroleum reserves, grew by 7.3 million barrels to 461 million barrels total last week, their highest level since June.

Tamas Varga, analyst at PVM, wrote in a note on Thursday, “On the economic front hopes are fading.”

All of this eclipsed the most recent driver of oil trading behaviour: growing expectations that a ceasefire agreement between Israel and Hamas could be approaching, despite Israeli prime minister Benjamin Netanyahu vowing to attack the southern Gaza city of Rafah.

As of 1332 GMT, Brent was up 40 cents at $83.84 per barrel, and West Texas Intermediate rose 27 cents at $79.27.

In relation to the sudden concern over surplus stockpiles, 87 percent of traders and analysts surveyed by Bloomberg predicted that the Organization of Petroleum Exporting Countries (OPEC) will extend its output curbs to the end of the year, to ward off global builds and shore up prices.

Richard Bronze, an analyst at Energy Aspects Ltd., stated, “OPEC+ will want to see evidence of sustained tightness in oil markets before starting to add supply, so there’s a good chance they will decide to extend…the discussions will not begin in earnest until closer to the [June 1] meeting date.”

Also on Thursday was speculation that the U.S. could buy near current levels to replenish its Strategic Reserve, which was depleted in 2022 due to a botched bid from the Joe Biden administration to lower prices at the pump; Washington doesn’t want to pay more than $79 per barrel.

In other oil news on Thursday, FactSet data reported that 77 percent of S&P 500 companies have exceeded earnings expectations while 60 percent have reported a positive revenue surprise; however, the energy sector reported the second-largest (year-over-year) earnings decline of all 11 market sectors at -25.5 percent while Q1 2024 revenue growth of -3.5 percent is the third lowest.

OilPrice.com stated, “Big Oil companies have reported mostly mixed Q1 results with lower gas prices and narrowing refining margins taking a toll on profits.”