Mixed Messages About U.S. Consumer Confidence Cause Oil To Retreat

However, analysts still think demand will outpace supply this year: File Image/Pixabay

Skittish crude traders on Tuesday caused oil prices to retreat as their nascent confidence about a strong U.S. driving season proved to be no match for worries stemming from a report that showed weak consumer confidence in that country.

As of 1720 GMT, Brent was down 77 cents at $85.24 per barrel, and West Texas Intermediate was down 58 cents at $81.05.

A survey from the Conference Board published Tuesday showed that the consumer confidence index slipped to 100.4 in June, with few consumers planning to buy vehicles and household appliances over the next six months.

However, the same survey showed that more consumers planned to go on vacation, and households remained upbeat about the labour market and inflation slowing over the next year.

Also on Tuesday, Fed Governor Lisa Cook said the U.S. central bank will enact a rate cut if the economy’s performance meets her expectations, but she refused to say when any cuts will take place.

Meanwhile on the geopolitical front, Gaza health officials reported that Israeli forces killed at least 24 Palestinians in three separate airstrikes on Gaza City, and this prompted  Claudio Galimberti, a director at Rystad Energy, to remark, "Geopolitical pressures continue to roil the oil market from multiple fronts... (the) tensions are expected to persist amid failed efforts to broker ceasefires."

Bloomberg noted that while Brent has edged higher due to geopolitical risks, “it still remains near the lowest level in six years”; also, “WTI’s prompt spread has weakened in recent days, fading to 76 cents in backwardation, down from as much as $1.15 last week.”

It fell upon analysts at JPMorgan Chase & Co. to express clear cut market optimism on Tuesday: they stated that Brent would average $84 per barrel in the third quarter and hit $90 by August or September, “underpinned by our expectations that global demand will outpace supply in the summer quarter.”

Also, analysts at Macquarie revised their Brent third-quarter forecast up to $86 per barrel, from $83.