Oil Down On Hints From OPEC That Summer Demand May Not Be Red Hot

But OPEC maintained that the market will continue to tighten: File Image/Pixabay

All it took to burst the emerging bullish sentiment among oil traders on Thursday was the Organization of the Petroleum Exporting Countries (OPEC) expressing reservations about demand in this summer's market – and consequently, crude prices declined by over 1 percent.

Specifically, OPEC in its latest monthly report said, "Organisation for Economic Co-operation and Development commercial inventories have been building in recent months, and product balances are less tight than seen at the same time a year ago."

OPEC also speculated that inflation and monetary tightening could negatively impact the usual U.S. seasonal demand uptick.

But even though OPEC maintained that oil demand in 2023 will rise by 2.32 million barrels per day (bpd) and increased its forecast for China, traders caused Brent to fall $1.24, or 1.4 percent, to settle at $86.09 per barrel.

West Texas Intermediate on Thursday slipped $1.10, or 1.3 percent, to close at $82.16 per barrel.

Giovanni Staunovo, analyst at UBS, said, "We saw builds in oil inventories this week in those countries which publish stocks data, so maybe that is what has been a realization that the market hasn't shifted into a deficit."

Still, for the month so far Brent has risen nearly 8 percent and overall crude has rebounded more than 20 percent since hitting a 15-month low in March; this is amid widespread forecasts of impending market tightness and speculation that the U.S. Federal Reserve is near the end of its interest rate hiking cycle.

Meanwhile, TACenergy pointed out in a note that while WTI approached its 200-day moving average after two days of solid gains, if the moving average held as resistance, prices could retreat to around $76 per barrel.

In other oil news on Thursday, Konstantinos Venetis, senior economist at TS Lombard, became the latest pundit to offer his opinion on the European Union's cap on Russian oil.

He told CNBC, "The fact that the cap is difficult to enforce (and) monitor is, in my view, also the main reason why policymakers will not be so keen to make adjustments — unless prices move a lot."

The news agency continued to offer opposing views of the cap's efficacy, with the International Energy Agency summing up the initiative to date by stating, "Willing buyers in Asia, namely India and, to a lesser extent, China, have snapped up discounted crude oil cargoes, but increasing volumes on the water suggest the share of Russian oil in their import mix may be getting too big for comfort."