ISLAMABAD
Oil futures slid over 2 percent for the second week in a row due to build-up in US fuel stocks, weak economic data from China and a report that the US and Iran were close to reaching an interim nuclear deal.
Both major global benchmarks Brent and West Texas Intermediate (WTI) posted a second straight week of loss, with Brent dipping 1.76 percent and WTI going down by 2.19 percent. Brent, the international benchmark for two-thirds of the world’s oil, went down to $74.79 from $76.13 a barrel, showing a decline of $1.34 on a week-on-week (WoW) basis. The WTI, the main oil benchmark for North America, went down to $70.17 from $71.74 a barrel on a weekly basis, registering a weekly loss of $1.57.
However, the price of Russian Sokol increased by $2.06 (+3.23 percent) to $65.93 from $63.87 on WoW basis. Similarly, Arab Light prices witnessed an increase of $1.37 (+1.8 percent) to reach $77.37 from $76 a barrel on a weekly basis. Following suit, the price for Opec Basket increased from $72.79 to $76.55 on a week-on-week basis, showing an uptick of $3.76 (+5.17 percent).
Oil futures started last week on a positive note as Saudi Arabia, the world’s largest oil exporter, announced a unilateral output cut of a million barrels per day for July. The Opec+ alliance of 23 oil-producing counties also pledged on June 4 to extend its current production cuts of 3.66 million bpd, or about 3.7 per cent of global demand, until the end of 2024 as economic growth concerns weighed on the fuel demand outlook.
However, prices remained steady on Tuesday and Wednesday after reports came about rising US fuel stocks and weaker-than-expected Chinese export data. Fears over tighter supply and higher demand, as the United States enters driving season which could drive prices higher, were offset by worries over a slow pickup in China’s fuel demand. China’s exports slumped 7.5 percent annually in May, its biggest fall since January, data from the Customs Bureau showed on Wednesday.
Meanwhile, a rise of 2.7 million barrels in petroleum stocks of the United States and 5.1 million barrels in distillate fuel inventories raised concerns about fuel demand in the world’s largest oil-consuming nation.
Both Brent and WTI lost more than $3 on Thursday after reports claimed that the US and Iran were close to signing a temporary deal that would offer some sanctions relief in exchange for a reduction in Iran’s uranium enrichment. However, prices pared losses after both Washington and Tehran denied the reports about a potential agreement.
Some analysts expect oil prices to rise if the US Federal Reserve pauses hiking interest rates at its next meeting over June 13-14. The Fed’s decision may also influence Saudi Arabia’s next move, according to analysts. However, it appears that traders are still more concerned about oil demand than they are about the adequacy of supply.
With news like Germany’s and the eurozone’s recession and shrinking manufacturing activity in the US, demand worry is quite justified. Even the possibility that the Federal Reserve might not announce another rate hike at its next meeting on June 13-14 could do nothing to change the dominant sentiment on the oil market.
