Oil prices edged higher early today, but continued to see further weekly declines due to the US Federal Reserve. signaled Again, there were no immediate plans to start cutting rates.
The Energy Information Administration’s weekly oil inventory report also estimated a large increase in inventories, suggesting weak demand, as did the Fed’s interest rate policy, contributing to the downward pressure on prices.
With interest rates at their highest levels in more than 20 years, concerns about U.S. oil demand are very legitimate. In addition, there is virtually no oil supply disruption in the Middle East due to the Israel-Hamas war, and the room for oil prices to rise is quite limited.
That potential is now being realized, with Brent crude falling below $84 a barrel this week, up from nearly $90 a month ago. West Texas Intermediate has fallen from more than $85 a barrel in early April to less than $80 a barrel this week.
However, it is unclear whether prices will continue to fall. In addition to all the bearish news, Reuters also reported this week. report The cartel and its OPEC+ partners cited anonymous OPEC officials as saying they could extend production cuts beyond the first half of this year.
The report recalls that OPEC+’s total withheld crude oil production amounted to 5.86 million barrels per day, of which the 2.2 million barrels per day called voluntary production cuts is only a part. The remaining 3.66 million barrels per day will continue until the end of 2024.
“While we believe there is a good chance that OPEC+ will be extended beyond June, we believe that we have not yet entered the period of serious discussions and decision-making, so we are not sure yet. We are not looking at the outlook,” said an Energy Aspects analyst. Richard Bronze told Reuters earlier this week.
Indeed, an extension would make the most sense in the current price environment, where news of additional supply sends prices crashing, especially as geopolitical premiums are fading.
“Geopolitical premiums are rapidly pricing in as Israel appears increasingly open to hostage deals,” said Robert Rennie, head of commodities and carbon strategy at Westpac Bank. Said Bloomberg. “While it is unlikely that Brent will move much beyond the $90-$95 region, the drop below $85 suggests there is a significant ceiling now.”
Written by Irina Slav for Oilprice.com
