July 10 2024: Oil prices declined on Wednesday as the effects of Hurricane Beryl diminished and inflation data underscored persistently weak consumer demand in China, the top crude importer.
As of 0632 GMT, Brent futures fell 58 cents, or 0.69%, to $84.08 a barrel, following a 1.3% drop in the previous session. U.S. West Texas Intermediate (WTI) crude decreased by 48 cents, or 0.59%, to $80.93 a barrel, after a 1.1% decline in the previous session.
Over the last three sessions, both contracts lost about 3% due to signs that Texas’ energy industry emerged relatively unscathed from Hurricane Beryl, which impacted the region on Monday.
Oil and gas companies began restarting operations on Tuesday. Some ports reopened, and most producers and facilities were ramping up output, although some sustained damage and power was not fully restored yet.
“The dissipation of Hurricane Beryl seems to be the primary driver for now, offering traders an opportunity to lock in profits after a bullish run over the last two weeks,” said Suvro Sarkar, energy sector team lead at DBS Bank.
Concerns about demand in China also pressured prices. Consumer prices in the world’s second-largest economy grew for a fifth month in June but missed expectations, while producer price deflation persisted.
“Expectations for easing Middle East tensions and weaker-than-expected Chinese CPI data for June weighed on oil prices today,” said independent market analyst Tina Teng.
In the Middle East, negotiations to secure a ceasefire in the Gaza war will resume in Doha, involving the intelligence chiefs of Egypt, the United States, and Israel.
However, limiting the losses in oil prices were comments from U.S. Federal Reserve Chair Jerome Powell, suggesting a stronger case for interest rate cuts. Lower interest rates should spur economic growth and, consequently, oil consumption.
Following Powell’s remarks, investors continued to bet on a nearly 70% chance that the Fed will cut rates in September.
“Powell’s remarks to the Senate affirmed the improvement in data through the June quarter, while maintaining that more good data would boost confidence in the inflation outlook,” said ANZ analysts in a note on Wednesday.
U.S. crude oil and gasoline inventories fell by 1.923 million barrels and 2.954 million barrels, respectively, according to market sources citing American Petroleum Institute figures on Tuesday, indicating steady summer fuel demand and driving the rebound after days of declines.
Official data from the U.S. Energy Information Administration will be released at 1630 GMT.
“Today’s U.S. inventory data will be closely watched, especially if drawdowns continue after last week’s significant draw,” said DBS Bank’s Sarkar.