Oil Drops As Saudis Call For More Output More Quickly

Meanwhile, a bank survey suggests confidence in a rebalance of supply and demand: File Image/Pixabay

As in recent weeks, a growing upward trajectory in oil prices was interrupted on Wednesday by the most ephemeral of market news, large builds in U.S. crude stocks, causing two key benchmarks to decline by about 1 percent.

Brent settled down 77 cents, or 1.2 percent, at $64.86 per barrel, while West Texas Intermediate settled down 56 cents, or 0.9 percent, at $62.85.

The Energy Information Administration on Wednesday reported that U.S. gasoline stocks soared by 5.2 million barrels, compared to expectations for a 600,000 barrel rise (however, crude inventories dropped by 4.3 million barrels compared to expectations of a 1 million barrel draw).

Giovanni Staunovo, an analyst with UBS, said, "There was a strong increase in refinery demand for crude, resulting in a large crude draw; but post-Memorial Day, the strong supply increase with weaker implied demand resulted in large refined product inventory increases."

Meanwhile, production halts in Canada due to the wildfires, which propelled crude prices upward for the past few sessions, partly ended as some companies resumed output on Wednesday.

Wednesday’s trading was also negatively affected by Saudi Arabia, which signalled to the Organization of the Petroleum Exporting Countries (OPEC) that it wanted to add at least 411,000 barrels per day (bpd) to the market in August and potentially September, to take advantage of peak summer demand.

Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, said, “It shows the course that OPEC is currently on will likely continue.”

In other oil news on Wednesday, a survey of 28 banks by law firm Haynes Boone showed that WTI prices will average $58.30 per barrel in 2025, down from $61.89 expected in Haynes Boone’s Fall 2024 survey.

The company stated, “This general decrease in oil prices may be attributable to increased production volume expectations stemming from enhanced OPEC production and the Trump administration’s pro-production and deregulation agenda, interacting with relatively unchanged global oil demand forecasts.”

Energy Practice Group partner Kim Mai remarked, “The results [of the survey] suggest that banks believe the underlying supply-demand dynamics will generally rebalance over time; it’s a vote of confidence in market fundamentals during a volatile policy environment.”