World News
Roller Coaster Crude Market Dips Again On Demand, Glut Fears
The roller coaster crude trading market dipped on Thursday less than a day after it reported gains of almost 2 percent, as traders resumed their worries over a glut of supply and the notion that demand isn't as robust as hoped.
Brent settled $1.29, or 1.7 percent, to $73.47 per barrel, while West Texas Intermediate settled at $71.65 per barrel, down $1.48, or 2.2 percent.
Reportedly, the worries focused on the fact that while Saudi Arabia and the United Arab Emirates have reached an accord that should gradually ease Organization of the Petroleum Exporting Countries (OPEC) output restrictions, the deal has yet to be finalized.
This was accompanied by concerns that while a large drawdown of inventories occurred last week in the U.S., fuel inventories rose in a week that included the normally busy Fourth of July holiday.
Bob Yawger, director of energy futures at Mizuho, remarked, "All that sense of gasoline optimism evaporated in just one week: if you don't need the gasoline, you don't need the crude oil to make the gasoline, and that's the only math that matters at the end of the day."
Still, the analytical community in general does not view these events with the same sense of panic as do crude traders: Goldman Sachs, Citi, UBS, and other banks expect supplies to remain tight in the coming months even if OPEC raises output.
Also, OPEC in its monthly report forecasts a strong resurgence in demand later this year and a return to pre-pandemic levels in 2022.
However, crude price declines aren't necessarily a bad thing, especially for fragile economies such as that of India: on Thursday, Hardeep Singh Puri, that country's new oil minister, vowed to work with Saudi and UAE oil producers "to bring greater predictability and calm in the global oil markets, and also to see hydrocarbons become more affordable."
Conversely, high oil prices prompted Fitch Ratings on Thursday to reaffirm the Saudis' A sovereign rating; it also caused Fitch to revise its outlook for the kingdom as a top oil exporter, from negative to stable.