Oil prices remained near four-month lows in Asian markets on Wednesday as traders absorbed the impact of OPEC+’s decision to increase supply later this year and rising U.S. crude and refined products inventories.
Brent crude futures were up by 1 cent at $77.53 a barrel by 0638 GMT, while U.S. West Texas Intermediate (WTI) crude futures dropped by 2 cents to $73.23 a barrel.
Both benchmarks saw nearly a dollar decline on Tuesday, marking their lowest settlement levels since early February. The prices had already decreased by about $3 a barrel on Monday.
The decline was triggered by news from the Organization of the Petroleum Exporting Countries (OPEC) and its allies about plans to boost supply starting in October, despite recent indications of slowing demand growth.
“Brent remains under pressure as a corner of the market continues to view OPEC’s proposed taper timeline for the voluntary cuts as a binding commitment to increase by 500,000 barrels per day in Q4 2024 irrespective of the fundamental oil outlook or sentiment come summer’s end,” noted Helima Croft, RBC Capital’s head of commodities research, in a market note cited by Reuters.
However, Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, emphasized that OPEC+ could pause the reversal of cuts or even reimplement them if demand was not sufficient to absorb the additional barrels.
“The intention has always been to slow roll the barrels back in and not to send the market into a tailspin with a supply surge,” Croft added.
Analysts from ING, led by Warren Patterson, expect crude oil supply to tighten in the third quarter, with OPEC+’s planned supply increases taking effect only from October. “Therefore, we believe the scale of the sell-off at the front end of the forward curve is overdone,” they commented.
In the United States, crude oil, gasoline, and distillate stocks rose last week, according to data from the American Petroleum Institute (API). The API reported that crude stocks increased by more than 4 million barrels in the week ending May 31, against analysts’ forecasts in a Reuters poll, which predicted a 2.3 million-barrel decline.
Independent energy analyst Tim Evans described the crude stock figures in the API report as “a clear bearish surprise.” Additionally, gasoline stocks increased by over 4 million barrels, double the build expected by analysts.
The U.S. Energy Information Administration (EIA) will release official stockpiles data on Wednesday at 1430 GMT. This data is particularly significant as it reflects fuel usage around the Memorial Day holiday, marking the beginning of the U.S. driving season.
