Oil prices extended losses on Thursday, with WTI price dropping to $78.0 per barrel. If WTI price declines, it may encounter support near $76.7 per barrel, while resistance may be found near $80.8 per barrel.
Oil prices dropped on Thursday despite a sharp decline in US crude oil stockpiles. US crude oil inventories showed that US crude stockpiles fell short of expectations. The US Energy Information Administration reported a weekly crude stockpile drop of 4.2M barrels for the week to May 25th, against expectations of a 1.6M barrel draw and following a build-up by 1.8M barrels the week before. However, the EIA reported an unexpected rise in gasoline and distillate fuel inventories as US oil demand weakened.
Signs of diminishing oil demand in China put pressure on oil prices on Wednesday. According to a Bloomberg report, China’s crude oil demand dropped in April due to slow economic growth. China’s oil demand outlook is weakening, putting pressure on oil prices.
Oil prices are also kept in check by high Fed interest rates. The US Federal Reserve kept interest rates unchanged at its latest policy meeting within a target range of 5.25% to 5.50%. The US Fed is keeping interest rates at a 23-year high, restricting economic growth and limiting the oil demand outlook as a result.
Odds of rate cuts are becoming more moderate, putting pressure on oil prices, as policymakers have stated that they do not intend to start reducing interest rates until there is more evidence of disinflation.
Oil prices are volatile ahead of the highly anticipated OPEC meeting on June 2nd. OPEC+ kept existing output cuts in place at its latest meeting, boosting oil prices. OPEC kept its output policy steady in April, maintaining its voluntary production cuts of 2.2 million barrels per day. Reports that the organization will extend its voluntary cuts vary, causing oil production concerns, and boosting oil prices.
Supply concerns provide support for oil prices, as the crisis in the Middle East threatens to disrupt oil distribution. Tensions around the Red Sea area raise concerns that hostilities may spread further in the Middle East, affecting oil supply and distribution.
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Written by:
Myrsini Giannouli
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