On Monday, crude oil prices fell due to concerns about fuel demand among the world’s top oil consumers, the US and China. This offset the supply pressures from OPEC+ production cuts and optimism about the resumption of US stock-buying. By 0130 GMT, North Sea Brent crude futures fell 43 cents to $73.74 a barrel, while US West Texas Intermediate crude fell 37 cents or 0.5% to $69.67 a barrel. Last week, both benchmarks fell for the fourth straight week, their longest streak of weekly losses.
From September 2022 onwards, investors are concerned that the US could slip into a recession, with a “significant risk” of a historic default within the first two weeks of June, which could create dollar-denominated commodities. Tina Teng, an analyst at CMC Markets, said that with China’s economic reopening progress being uneven and the possibility of a US bank failure, oil prices remain under pressure from weak demand outlook. However, Teng added that China’s economic indicators for industrial production, fixed asset investment, and retail sales are improving, which could boost oil demand.
IG analyst Tony Sycamore believes that with the debt ceiling fast approaching, and a stronger US dollar, market sentiment on oil is likely to remain lukewarm at best. Nonetheless, global oil supplies could be tight in the second half of the year as OPEC+ and its allies, including Russia, make further production cuts, reducing the availability of sour crude. Iraqi oil minister Hayan Abdulghani said Iraq does not expect OPEC+ to make further cuts at its next meeting in June.
Energy Secretary Jennifer Granholm may begin buying back oil for the Strategic Petroleum Reserve (SPR) after concluding a Congress-mandated sale in June. This announcement followed a weekly report from energy services firm Baker Hughes, which stated that US oil rig production fell by two this week to 586, the lowest level since June 2022, while gas rig production fell by 16 to 141.
Meanwhile, the leaders of the Group of Seven (G7) countries may announce new measures at their meeting on May 19-21 to tighten sanctions on third countries involved in sanctions evasion. These measures aim to undermine Russia’s future energy production and curb trade that supports the Russian military.