Oil fell as the latest economic report revealed the slowdown effects of monetary tightening and pushed demand concerns to the market’s forefront.
West Texas Intermediate fell the most in a month to slip below $80 after being pressured by a rising dollar and dampened risk appetite throughout the session. An economic survey from the Federal Reserve late Wednesday showed the US economy stalled in recent weeks with hiring and inflation slowing and access to credit narrowing.
While the report likely reinforces the chances that the Federal Reserve will ease its policy of interest rate hikes, the demand implications are unsettling the crude market. A report showing that the US drew from the nation’s oil reserves failed to quell worries.
“The market is laser-focused on product demand and this report will not ease concerns that demand is fragile,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth, referring to Energy Information Administration data. “These numbers were not bad, but they were not good enough to keep traders sleeping well at night.”
Nationwide inventories declined 4.6 million barrels last week. Total demand rose “but not really where it matters,” said Emily Ashford, Executive Director of Energy Research, noting that gasoline demand fell and diesel consumption was effectively flat.
- WTI for May delivery dropped $1.70 to settle at $79.16 in New York.
- Brent for June settlement fell $1.65 to settle at $83.12 a barrel.
Despite the pullback, crude is still up from a 15-month low reached in mid-March following turmoil in the banking sector. A surprise announcement by OPEC+ on production cuts and curbed Iraqi flows pushed oil back into the $80-range. The producers’ group is looking to force consumers to take oil out of storage and shore up prices amid tentative demand growth.
(with assistance from Natalia Kniazhevich)
Published at Wed, 19 Apr 2023 13:03:49 -0700