Oil slides on concerns of slowing demand, market awaits U.S stockpiles report for further direction

Business a.m.

Oil prices eased on Thursday, as robust U.S. economic data signaled the likelihood of ongoing higher borrowing costs, potentially denting demand for oil. 

Against the backdrop of a closely watched U.S. crude oil stockpiles report due later in the day, Brent futures dipped 0.3 percent to $83.34 a barrel, while U.S. West Texas Intermediate (WTI) crude fell by a similar margin to $79.00 per barrel.

Reports show that the oil bearish sentiment persisted throughout the previous month, with both Brent and WTI benchmarks on course for substantial monthly losses, despite larger-than-expected U.S. crude inventory drawdowns reported by API. 

Yeap Jun Rong, IG market strategist, linked the downward pressures on oil prices to the broader risk-off environment, indicating that prevailing market uncertainty could potentially overshadow supportive factors like inventory declines.

U.S. oil market dynamics revealed a complex picture on Wednesday, with American Petroleum Institute figures reported by market sources indicating significant declines in U.S. crude and gasoline inventories, while distillates posted gains. The API figures showed crude stocks down by 6.49 million barrels, with inventories dipping by 452,000 barrels, and distillates increasing by 2.045 million barrels.

The U.S. oil storage landscape shifted in unexpected ways last week, according to American Petroleum Institute (API) figures released on Wednesday. Analysts had projected a more conservative decline of 1.9 million barrels in crude inventories, along with modest increases in gasoline and distillate stocks. However, the actual figures showed a larger-than-expected drop in crude inventories, an unexpected decrease in gasoline stocks, and a significantly higher rise in distillate inventories.

Global oil inventories saw a sharp rise throughout April as fuel demand remained tepid, leading analysts and OPEC+ delegates to anticipate that the alliance of OPEC nations and allies, including Russia, may elect to keep supply cuts in place during their upcoming meeting on June 2. 

Market strategist,Rong suggested that OPEC members may even extend current production cuts into the third quarter to support prices, highlighting the growing importance of the meeting in determining the trajectory of oil prices.