Apr 17 2024: Oil prices have dropped for the third consecutive session, primarily due to worries about global demand and economic challenges. Brent futures for June fell by 21 cents to $89.81 a barrel, while U.S. crude futures for May declined by 19 cents to $85.17 a barrel.
The ongoing softening of oil prices this week reflects concerns over higher U.S. commercial inventories, weaker economic data from China, and reduced expectations of interest rate cuts. These factors have offset gains from geopolitical tensions, with analysts closely monitoring how Israel might respond to Iran’s recent attack.
Analysts do not anticipate significant sanctions on Iran’s oil exports from the United States following the missile and drone strike on Israel. John Evans from oil broker PVM noted that oil prices are shedding the war premium that had been factored in, alongside facing setbacks in hopes of interest rate cuts.
Top U.S. Federal Reserve officials, including Chair Jerome Powell, refrained from providing guidance on interest rate cuts, disappointing investors hoping for reductions in borrowing costs. Similarly, the slowdown in Britain’s inflation rate suggests a delay in a rate cut by the Bank of England, while expectations remain for a European Central Bank rate cut in June due to inflation slowing across the euro zone.
Market strategist Yeap Jun Rong from IG highlighted concerns over a build-up in U.S. crude inventories, mixed economic data from China, and near-term overbought technicals prompting profit-taking in the oil market.
Despite faster-than-expected economic growth in China’s first quarter, indicators indicate frail domestic demand. Additionally, U.S. crude inventories increased by about 1.4 million barrels last week, with official data from the Energy Information Administration awaited.
Moreover, Tengizchevroil’s plans for scheduled maintenance at the Tengiz oilfield in Kazakhstan in May add to the market dynamics influencing oil prices.
