Although there were hints of tighter supply and increasing demand, oil prices remained within a narrow range on Friday as solid labour market statistics fanned concerns about rising U.S. interest rates. Data released on Thursday revealed that U.S. stockpiles had decreased more than anticipated in the week ending June 30, with a larger-than-expected decline in …
Although there were hints of tighter supply and increasing demand, oil prices remained within a narrow range on Friday as solid labour market statistics fanned concerns about rising U.S. interest rates. Data released on Thursday revealed that U.S. stockpiles had decreased more than anticipated in the week ending June 30, with a larger-than-expected decline in petrol inventories pointing to increased fuel consumption during the summer travel season.
The report supported Thursday’s stable close in the crude markets, mainly preventing a crash in broader financial markets after private payrolls data revealed a robust U.S. labour market, escalating concerns that the Federal Reserve would continue to be aggressive in raising interest rates. The reduction in U.S. inventories also follows Saudi Arabia’s announcement that it will maintain a 1 million barrels per day (bpd) supply cut until the end of August and maybe beyond. The reduction in manufacturing started at the beginning of July. In addition, Russia announced that in August it will reduce oil exports by 500,000 bpd. The production cuts, which follow those made earlier in the year by the Organisation of Petroleum Exporting Countries, are primarily intended to tighten up the world’s crude markets and maintain oil prices.
Currently, analysts anticipate that the oil market will stay tight for the balance of the year, which will likely keep prices stable. Strong increases in crude prices, however, are also uncertain given the deteriorating macroeconomic outlook. Concerns over whether China will be able to spearhead a recovery in oil demand this year were raised by a spate of weaker-than-expected economic indicators from the country.
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