Oil Dips as Economist Wonders if Traders Can Suppress Economic 'Angst'

by Ship & Bunker News Team
Friday May 19, 2023

Another drop for oil prices came on Friday, less several than in previous sessions, as elements traders expressed optimism about on Thursday were suddenly viewed negatively, case in point: an agreement on the U.S. government's debt ceiling, which they now regard as a remote hope.

Brent settled down 28 cents at $75.58 per barrel, while West Texas Intermediate for July expiry fell 25 cents to $71.69; the less active U.S. crude contract for May, due to expire on Monday, closed down 31 cents to $71.55.

Oil gave up earlier gains after debt ceiling talks were paused in Washington; a White House official said a deal was still possible, but if one isn't reached the government may be unable to pay its bills by June 1.

Traders were also rattled by Jerome Powell, chair of the U.S. Federal Reserve, who on Friday stated that inflation was still "far above" his objective and no decision has yet been made on another interest rate hike.

Robert Yawger, analyst at Mizuho, quipped, "There's not a lot for the bulls to hang their hats on."

Other oil related news on Friday was sure to stoke both bearish and bullish sentiment: first, the U.S. oil rig count fell by 11 to 575 this week, the biggest weekly drop since September 2021, according to Baker Hughes.

Meanwhile in China, the oil refinery throughput in April rose 18.9 percent from a year earlier to the second-highest level on record, according to data; this was to meet recovering domestic fuel demand and build stockpiles ahead of the summer travel season.

The National Bureau of Statistics also revealed that total refinery throughput reached 61.1 million tonnes, equivalent to 14.87 million barrels per day (bpd); the May Day holiday from April 29 through May 3 also provided a significant boost to domestic demand for both gasoline and jet fuel.

Han Tan, chief market analyst at Exinity Group, summarized the oil market's current state by remarking, "Oil bulls still have much to do to restore WTI back to the $80 handle, with prices still weighed down by persistent demand-side fears.

"Oil's upside is likely to remain capped until markets can put to bed the angst surrounding the looming recession, especially if the Chinese economy can offer evidence of a broader and more resilient recovery."