Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Oil slips for a third straight day on prospect of US rates staying high

Published 2024-05-21, 08:59 p/m
© Reuters. FILE PHOTO: Model of Oil barrels are seen in front of rising stock graph in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration/File photo
LCO
-
CL
-

By Nicole Jao

NEW YORK (Reuters) -Oil prices fell more than 1% on Wednesday, retreating for a third straight day, as Fed officials rekindled worries about oil demand when they indicated interest rate cuts might be deferred due to sustained inflation.

Brent crude futures settled 98 cents lower, or 1.18%, at $81.90 a barrel. U.S. West Texas Intermediate crude (WTI) was down $1.09, or 1.39%, to $77.57. Both benchmarks settled about 1% lower on Tuesday.

Federal Reserve officials at their last policy meeting indicated inflation could take longer to ease than previously thought, minutes of the Federal Reserve's May policy setting meeting, released on Wednesday, showed.

Lower interest rates reduce borrowing costs, freeing up funds that could boost economic growth and demand for oil.

"I wouldn't expect rate cuts to come before one of the fall meetings," said John Kilduff of Again Capital.

Also in the U.S., Energy Information Administration said crude stocks rose by 1.8 million barrels during the week ended May 17. That compares with a 2.5-million-barrel draw analysts forecast in a Reuters poll and a 2.48-million-barrel rise shown in the data from the American Petroleum Institute (API), an industry group. [EIA/S] [EIA/S]

"There was strong demand from refiners for crude oil and the gasoline demand was one of the highest we've seen in quite some time," Kilduff said. Part of that demand increase was due to pre-Memorial Day weekend stockpiling by suppliers, he noted.

Crude markets have been pressured by weakening fundamentals, such as falling spot Brent over futures and softer refinery margins. This will likely force OPEC+ to extend production cuts at its June meeting to support prices, according to Ole Hansen, Saxo Bank's head of commodity strategy.

© Reuters. FILE PHOTO: Model of Oil barrels are seen in front of rising stock graph in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration/File photo

Physical crude markets have been weakening. In another sign that concern of tight prompt supply is easing, the premium of Brent's first-month contract over the second, known as backwardation, is close to its lowest since January.

"The view on the fundamental outlook remains grim," said Tamas Varga, an analyst with oil broker PVM.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.