Mar 27 2024: Oil prices experienced a second consecutive day of decline, dropping over 1% on Wednesday due to a surge in U.S. stockpiles and indications that the OPEC+ producer group is unlikely to alter its output policy in an upcoming technical meeting.
Brent crude futures for May delivery fell by 1.12%, or 97 cents, to $85.28 a barrel by 0929 GMT, while the June contract also dropped by 1.07%, or 92 cents, to $84.71. The May contract, set to expire on Thursday, contributed to the downward pressure on prices.
Similarly, U.S. West Texas Intermediate (WTI) crude futures for May delivery declined by 1.14%, or 93 cents, reaching $80.69 per barrel.
The retreat in oil prices follows last week’s peak, remaining approximately 3% above the average closing price in early March. The surge in U.S. crude inventories and the anticipation of OPEC+ maintaining its current output policy contributed to profit-taking and a downward correction in oil prices.
According to market sources citing American Petroleum Institute data, U.S. crude oil inventories surged by 9.3 million barrels in the week ending March 22, with distillate inventories rising by 531,000 barrels and gasoline stocks decreasing by 4.4 million barrels.
OPEC+ is unlikely to make any changes to its oil output policy until the full ministerial gathering in June, as revealed by three OPEC+ sources to Reuters ahead of the upcoming technical meeting. This decision follows the extension of output cuts of approximately 2.2 million barrels per day (bpd) until the end of June, although some members such as Russia and Iraq have faced challenges in complying with the agreed cuts.
The struggle to maintain production quotas within OPEC+ has raised concerns about the group’s ability to adhere to its targets, with OPEC exceeding its targets by 190,000 bpd in February, according to a Reuters survey.
Traders are closely monitoring OPEC members for any potential shifts in their production quotas, as indicated by analysts at ANZ in a report on Wednesday.
In economic news, leading German economic institutes revised down their forecast for the country’s economic growth in 2024 to 0.1%, down from a previous estimate of 1.3%, signaling challenges for Europe’s economic recovery.
