Oil fell as concerns over an uneven demand recovery and slowing economic growth due to monetary tightening offset signs of shrinking stockpiles.
(Bloomberg) — Oil fell as concerns over an uneven demand recovery and slowing economic growth due to monetary tightening offset signs of shrinking stockpiles.
West Texas Intermediate dropped below $80 a barrel after closing little changed Tuesday. The recovery in fuel consumption has been uneven as Asia grapples with a flood of Russian oil into an already well-supplied market. Refiners in the region are mulling run cuts as profits from turning crude into products such as diesel plunge, while timespreads for benchmark Dubai grade weakened.
“Lingering concern that further US interest rate cuts could tip economies into recession and lead to slower growth is overtaking the supply focus of the OPEC cuts,” said Ed Bell, senior director for market economics at Dubai-based lender Emirates NBD PJSC. “There’s also concern about swelling balances in refined products and margins are compressed.”
Crude recently rebounded after tumbling to a 15-month low in mid-March following turmoil in the banking sector. A surprise announcement by OPEC+ on production cuts and curbed Iraqi flows have underpinned some of the gains. After oil inventories crept up over the past year, the producers’ group is looking to force consumers to take oil out of storage, helping underpin prices even amid tentative demand growth.
The American Petroleum Institute reported crude inventories at the storage hub at Cushing, Oklahoma, dropped again last week, according to people familiar with the data. If confirmed by government figures later on Wednesday, it will be the longest run of declines in more than a year.
A widely-watched economic survey from the Federal Reserve is also scheduled to be released later on Wednesday and will provide further insight on the health of the US economy, along with the path of monetary policy.
“There still appear to be some concerns over the broader demand outlook and weaker refinery margins will only be adding to these concerns,” said Warren Patterson, the head of commodities strategy for ING Groep NV in Singapore.
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