Oil Prices Dip Amid 4M Barrel Inventory Surge

Oil Prices Dip Amid 4M Barrel Inventory Surge

Key points:

  • Oil prices Reactions: Brent and WTI crude futures declined by 0.1%, reflecting cautious market sentiment.
  • Inventory Increase: US crude inventories rose by 4 million barrels, against expectations of a 1.9 million barrel draw.

On Wednesday, oil prices fell slightly in Asian trade, maintaining their four-month lows after unexpected data showing a significant increase in US crude inventories. Specifically, on May 31, it was reported that US crude inventories saw a build of approximately 4 million barrels in the week leading up to the end of May, defying expectations for a draw of 1.9 million barrels.

Oil Prices See 0.1% Dip, Brent at $77.44, WTI at $72.98

The price reactions in the market were immediate but modest. Brent oil futures expiring in August recorded a minor decline of 0.1%, settling at $77.44 a barrel. Similarly, West Texas Intermediate (WTI) crude futures fell by 0.1%, ending at $72.98 a barrel. These price adjustments reflect the market’s cautious stance amid mixed economic signals and inventory data. Recent weak US economic reports have raised concerns about slowing demand and cooling economic growth.

Sixth Consecutive Session of Losses for Brent and WTI

Brent and WTI contracts have extended their losses into a sixth consecutive session, nearing their weakest levels since early February. The ongoing price decline highlights a broader market sentiment of unease, particularly as oil prices have been nursing steep losses this week. This trend worsens due to OPEC and allies OPEC+ signalling plans to reduce some production cuts this year.

US Crude Inventories Increased by 4 Million Barrels

The build in US crude inventories is not an isolated phenomenon. Gasoline and distillate inventories also increased, raising concerns about the world’s largest fuel consumer demand, especially as the travel-heavy summer season begins. The potential build in inventories is particularly notable given that it came despite the Memorial Day weekend, traditionally a period of high fuel consumption. American Petroleum Institute data, preceding government inventory data due Wednesday, is a critical market indicator for participants.

Weak Economic Data Heighten Oil Prices

Adding to the market’s apprehension, weak economic data from major global oil consumers have compounded worries about future demand. In the US, disappointing figures on job openings have raised alarms. Additionally, a lacklustre purchasing managers index reading has added to concerns. Moreover, a downgraded gross domestic product print has further signalled the prospect of cooling economic growth. Such trends could lead to softer oil demand in the coming months. Moreover, top oil importer China has also posted mixed PMI readings for May, further clouding the outlook for global oil consumption.