Oil prices stable as economic fears offset supply woes
Oil prices were stable today as the market balanced cuts to OPEC+ production quotas against fears of economic slowdown and lower Chinese fuel demand.
Brent crude futures eased by seven cents, or 0.08%, to $91.55 a barrel, while US West Texas Intermediate (WTI) crude futures were down 12 cents, or 0.14%, at $85.34.
WTI had risen earlier by more than $1 a barrel on a weaker dollar, which makes oil cheaper for buyers holding other currencies.
But the US dollar index, which measures the greenback against six peers rose later in the session, weighing on oil prices in European trading.
Also in focus was the Bank of England’s plan to start selling the vast government bond holdings it amassed during the coronavirus crisis.
That sent long-dated yields higher, indicating increased risks to financial stability.
Meanwhile, China’s fuel demand outlook weighed on sentiment after the world’s top crude oil importer delayed release of economic indicators originally scheduled to be published today. No date was given for a rescheduled release.
On the supply side, US crude oil stocks were expected to have risen for a second consecutive week, a preliminary Reuters poll showed yesterday.
Output in the Permian Basin of Texas and New Mexico, the biggest US shale oil basin, is forecast to rise by about 50,000 barrels per day (bpd) to a record 5.453 million bpd this month, the Energy Information Administration said.
Some price support came from investors increasing long positions in futures after a 2 million barrel per day (bpd) cut to output targets agreed by OPEC+, ANZ Research analysts said in a note.
Several members of the oil producer group have endorsed the cut after the White House accused Saudi Arabia of coercing some nations into supporting the move, a charge Riyadh denies.
“Even though the production cut is not likely in reality to be even half as high, the US government sees it as an affront. The question now is how the US will react, as this could have a far-reaching impact on the oil market,” Commerzbank said in a note.
The Biden administration plans to sell oil from the Strategic Petroleum Reserve in an effort to cool fuel prices before next month’s congressional elections, sources told Reuters this week.