May 8 2024: In Asian trading on Wednesday, oil prices dropped as industry data revealed a buildup in crude and fuel inventories in the United States, indicating weak demand. Additionally, cautious expectations about supply emerged as the OPEC+ policy meeting approaches next month.
Brent crude oil futures declined by 57 cents, or 0.69%, to $82.59 per barrel by 0645 GMT. Meanwhile, U.S. West Texas Intermediate crude futures fell by 53 cents, or 0.68%, to $77.85 per barrel.
Both benchmarks saw marginal decreases in the previous session due to signs of easing supply constraints and weaker global oil demand, as indicated in an EIA forecast report on Tuesday.
Market sources, citing figures from the American Petroleum Institute, reported a rise of 509,000 barrels in U.S. crude stocks for the week ending May 3. Inventories of gasoline and distillate fuel also increased.
Analysts at ING noted that the API numbers released overnight were moderately bearish, primarily due to stock builds in both crude and petroleum products. Concerns over softer-than-usual U.S. gasoline demand, coupled with the stock-build, have exerted downward pressure on the prompt RBOB gasoline crack.
Official U.S. government data on stockpiles is expected at 1430 GMT, with analysts polled by Reuters anticipating a decline of approximately 1.1 million barrels in U.S. crude oil inventories for the previous week.
Market sentiment was also impacted by cautious expectations regarding supply cuts from OPEC+ ahead of their June 1 policy meeting. The ING analysts mentioned that there are expectations for OPEC+ members to extend their additional voluntary supply cuts beyond the second quarter of the year.
Furthermore, hopes for a ceasefire in Gaza have contributed to the downward pressure on oil prices in recent sessions, with analysts noting a decline in the risk premium on oil as a result.
Despite these factors, some analysts believe that short-term demand remains relatively strong, which has limited the overall decline in oil prices.