Oil flips to a loss as traders weigh US economy against supply
1 min read 11 May 2023, 08:11 PM ISTOil swung to a loss as traders weighed worse-than-expected US economic data against an improving inflation outlook and supply constraints.West Texas Intermediate slumped below $72 a barrel, after rising as much as 1.3% in earlier trading
PremiumOil swung to a loss as traders weighed worse-than-expected US economic data against an improving inflation outlook and supply constraints.
West Texas Intermediate slumped below $72 a barrel, after rising as much as 1.3% in earlier trading. US jobless claims increased to the highest since October 2021 and a gauge of producer sentiment came in below expectations.
Those factors blunted bullish trends, including signs of inflation moderating in the US, the potential for policy stimulus in China and recent supply restrictions.
Supplies from Canada have been hit by a spate of wildfires across Alberta. In the Middle East, Iraq is still waiting for Turkey to restart exports through the port of Ceyhan amid a dispute over payments. Output cuts by the Organization of Petroleum Exporting Countries and its allies should continue to tighten the market later this year, as long as demand keeps rising.
OPEC said in its monthly global outlook Thursday that it sees global demand continuing to rise this year, outpacing additions in production from countries outside the group.
“Macroeconomic developments remain as important for oil traders as supply and demand," said Ole Sloth Hansen, head of commodity strategy at Saxo Bank AS. Crude markets had been helped by “the uptick in demand for gasoline and jet fuel, and very low stocks of fuel supporting a recovery in refinery margins" as evidenced in a US report this week, he added.
In the US, the Energy Information Administration’s crude market report on Wednesday offered a mixed picture. Commercial crude stockpiles rose nearly 3 million barrels last week. Still, gasoline and distillate stockpiles fell, data showed.
Crude has weakened this year as worries over the Federal Reserve’s path of monetary tightening and a potential US recession outweighed gains from a surprise output cut by OPEC .
Should the Fed opt to suspend its tightening cycle, that may undermine the dollar, bolstering the allure of commodities priced in the US currency. A Bloomberg gauge of the greenback rebounded after falling Wednesday. Traders are also closely watching for clues on the pace of China’s growth.
“China’s latest inflation data showed signs of uneven recovery," said Ravindra Rao, head commodity research at Kotak Securities Ltd. At the same time, “supply disruptions from Iraq and Canada provided a floor for prices," he said.
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