Last Updated: June 07, 2023, 00:51 IST
New York, United States of America (USA)
Both crude benchmarks climbed higher for a third day in a row on Monday after Saudi Arabia, the world’s top exporter, said over the weekend that its output would drop by 1 million barrels per day (bpd) to 9 million bpd in July. (Image: Reuters File)
The U.S. dollar, meanwhile, rose to its highest level against a basket of currencies since hitting a 10-week high on May 31
Oil prices eased on Tuesday as worries sluggish global economic growth could reduce energy demand outweighed Saudi Arabia’s pledge to deepen output cuts.
Brent futures fell 34 cents, or 0.4%, to $76.37 a barrel by 1:48 p.m. EDT (1748 GMT), while U.S. West Texas Intermediate (WTI) crude fell 34 cents, or 0.5%, to $71.81.
Both crude benchmarks climbed higher for a third day in a row on Monday after Saudi Arabia, the world’s top exporter, said over the weekend that its output would drop by 1 million barrels per day (bpd) to 9 million bpd in July.
But weaker demand, stronger non-OPEC supply, slower economic growth in China and potential recessions in the U.S. and Europe mean the Saudi cut is unlikely to achieve a “sustainable price increase” into the high $80s and low $90s, Citi analysts said in a note on Tuesday.
The U.S. dollar, meanwhile, rose to its highest level against a basket of currencies since hitting a 10-week high on May 31 as investors waited on fresh signals on whether the U.S. Federal Reserve will raise or hold interest rates in June.
A stronger dollar can weigh on oil demand by making the fuel more expensive for holders of other currencies.
One of those signals came from the U.S. services sector, which barely grew in May as new orders slowed.
“Crude prices are heavy as global growth concerns continue to suggest a much weaker crude demand outlook,” said Edward Moya, senior market analyst at data and analytics firm OANDA.
Supply chain pressures cooled again in May, New York Fed data showed, in a development that further eased what had been one of the key factors that had helped drive surging inflation pressures around the work.
The mood was further dented by data showing that German industrial orders fell unexpectedly in April.
The World Bank, however, raised its 2023 global growth outlook as the U.S., China and other major economies have proven more resilient than forecast, but said higher interest rates and tighter credit will take a bigger toll on next year’s results.
Higher interest rates boost borrowing costs, which can slow the economy and reduce oil demand.
Looking ahead, the market is waiting for data this week from the U.S. and China that could provide fresh demand indications in the world’s two biggest oil consumers.
China, the second-biggest oil consumer, will release its May trade data on Wednesday.
In the U.S., the Energy Information Administration (EIA) projected U.S. crude output will rise from 11.9 million bpd in 2022 to 12.6 million bpd in 2023 and 12.8 million bpd in 2024, That compares with a record 12.3 million bpd in 2019.
EIA also projected U.S. oil demand would rise from 20.3 million bpd in 2022 to 20.4 million bpd in 2023 and 20.7 million bpd in 2024. That compares with a record 20.8 million bpd in 2005, according to EIA data going back to 1973.
The market is still waiting for U.S. oil inventory data from the American Petroleum Institute (API), an industry group, at 4:30 p.m. EDT on Tuesday and the EIA at 10:30 a.m. EDT on Wednesday.
Analysts forecast U.S. energy firms added about 1.0 million barrels of crude into storage during the week ended June 2, according to a Reuters poll. [EIA/S] [API/S]
That would be the second weekly increase in a row and compares with an increase of 2.0 million barrels in the same week last year and a five-year (2018-2022) average increase of 2.3 million barrels.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – Reuters)
