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Oil steadies amid economic concerns, higher U.S. crude stocks
Global Banking & Finance Review®
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By Laura Sanicola and Trixie Yap
(Reuters) -Oil prices barely moved on Wednesday as markets weighed a possible build in U.S. crude stockpiles and economic concerns against planned supply cuts by the world’s biggest oil exporters and hopes for higher global demand.
Brent futures fell 6 cents to $79.34 a barrel by 0615 GMT, and U.S. West Texas Intermediate (WTI) crude slipped 6 cents to $74.77 a barrel.
“Fundamentally, we should reach a supply deficit situation in the third quarter, but whether that is trumped by recession concerns and cautious sentiment around rate hikes remains to be seen,” said DBS Bank’s lead energy analyst Suvro Sarkar.
Investors were awaiting U.S. inflation data on Wednesday for clues on the interest rate outlook in the world’s biggest economy. Higher rates can slow economic growth and reduce oil demand.
For now, markets are pricing in a 92% chance of a 25-basis-point hike later this month, the CME FedWatch tool showed.
In a bearish demand sign, U.S. crude inventories rose about 3 million barrels in the week to July 7, market sources said, citing American Petroleum Institute industry figures. Analysts polled by Reuters expected a 500,000-barrel rise in crude stocks.
If confirmed in data due from the Energy Information Administration (EIA) later on Wednesday, that would be the first crude stock build in four weeks and compares with an increase of 3.3 million barrels in the same week last year and a five-year average decline of 6.9 million barrels.
Nevertheless, forecasts from the U.S. EIA and the International Energy Agency point to the market tightening into 2024. The EIA projected global demand would outpace supply by around 100,000 bpd in 2023 and by 200,000 bpd in 2024.
Separately, the International Energy Agency (IEA) said the oil market should stay tight in the second half of 2023, citing strong demand from China and developing countries combined with recently announced supply cuts, by top exporters Saudi Arabia and Russia, among others.
Top producer Saudi Arabia pledged last week to extend a production cut of 1 million bpd in August, while Russia will cut exports by 500,000 bpd.
“The short-term crude demand outlook shouldn’t be that bad, as everyone is taking a vacation that requires some travel this summer,” said OANDA senior analyst Edward Moya.
(Reporting by Laura Sanicola and Trixie Yap; Editing by Sonali Paul, Clarence Fernandez and Sonali Paul)
Crude oil is a natural, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. It is used to produce fuels, lubricants, and other products.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to keep the economy running smoothly.
Crude stockpiles refer to the reserves of crude oil held in storage. They are monitored to assess supply and demand dynamics in the oil market.
A supply deficit occurs when the demand for a product exceeds its supply. In the oil market, this can lead to higher prices and increased competition for available resources.
A basis-point hike refers to an increase in interest rates by one-hundredth of a percentage point (0.01%). It is a common term used in financial markets to describe changes in monetary policy.
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