Oil snaps 3-day winning streak, crashes 2% on poor US demand; Brent drops 6% in May ahead of OPEC+ verdict

  • Both oil benchmarks are headed for monthly losses, with Brent futures on track for a decline of over six per cent from last month, while WTI was poised for a slide exceeding 4.5 per cent.

Nikita Prasad
Published30 May 2024, 10:53 PM IST
Brent futures on track for a decline of more than six per cent from last month ahead of OPEC+ verdict (Image: Pixabay)
Brent futures on track for a decline of more than six per cent from last month ahead of OPEC+ verdict (Image: Pixabay)

Crude oil prices snapped their three-day winning streak and crashed nearly two per cent on Thursday, May 30, after the US government reported weak fuel demand and a surprise jump in gasoline and distillate fuel stockpiles. The downtrend comes ahead of the output policy decision by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) due on June 2.

Brent crude futures fell by $1.25, or 1.5 per cent, to $82.35 a barrel. US West Texas Intermediate crude futures were $1.15, or 1.5 per cent, lower at $78.08 a barrel. Coming to domestic prices, crude oil futures last traded 2.05 per cent lower at 6,488 per barrel on the multi-commodity exchange (MCX).

Both crude oil benchmarks were headed for monthly losses, with Brent futures on track for a decline of more than six per cent from last month, while WTI was poised for a slide exceeding 4.5 per cent, according to news agency Reuters.

Also Read: Oil prices hit 4-week high ahead of OPEC+ policy verdict, US demand hopes; Brent highest since May 1 at $85/bbl

What's weighing on crude oil prices?

-US crude stocks fell more than expected last week as refiners in the country ramped up to their highest utilization rates in over nine months, according to Energy Information Administration (EIA). There was a surprise jump in gasoline and distillate fuel inventories as demand weakened even as output rose.

-Crude stocks declined by 4.16 million barrels in the week ended May 24, EIA data showed. Gasoline and distillate stockpiles together were about 4.57 million barrels higher. Analysts said that the weakness in gasoline markets have continued to drag down the rest of the oil complex.

-Analysts had expected that the US Memorial Day holiday on May 27-- the start of the US summer driving season, would boost fuel demand. Yet EIA's measure of gasoline demand slipped about two per cent from the prior week to 9.15 million barrels per day.

-Further pressuring oil prices, investors' risk-appetite has been subdued by the prospect of delayed monetary easing in the US and Europe, said analysts at financial brokerage ActivTrades. "Fear trading" is dominating financial markets ahead of Friday's US consumer price index data, according to analysts.

Oil investors are also cautious ahead of the OPEC meeting this weekend. The producer group will decide whether to extend, deepen or unwind supply cuts. Soft fuel demand and rising global oil inventories may help convince OPEC+ to maintain supply cuts when they meet on Sunday, as per OPEC delegates.

Also Read: Expert View | India's FY24 GDP growth to hit 8%; Infra investments to exceed consumption in FY25: DBS Bank's Radhika Rao

Where are prices headed?

Hawkish Fed rhetoric has boosted the dollar and yields, keeping the risk appetite limited. OPEC is expected to prolong output cuts into the second half of 2024, according to Kaynat Chainwala – Senior Manager, Commodities Research – Kotak Securities.

"Oil prices are weighed by selling seen in the entire commodities basket. However, prices may see some buying support at lower levels. Technically, prices are expected to find support around 6,540, while on the upside resistance is seen at 6,670/ 6,740,'' said Pranav Mer, Vice President, EBG - Commodity & Currency Research, JM Financial Services.

 

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First Published:30 May 2024, 10:53 PM IST
HomeMarketsCommoditiesOil snaps 3-day winning streak, crashes 2% on poor US demand; Brent drops 6% in May ahead of OPEC+ verdict

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