Oil edges higher as Saudi output cut overweighs rising US fuel stocks
Oil prices edged higher on June 7 as Saudi Arabia’s surprise weekend pledge to deepen output cuts outweighed weak Chinese export data and rising US fuel stocks. Saudi Arabia, the world’s top oil exporter, will make deep production cuts of 1 million barrels per day (bpd) starting from July, as part of a broader output-limiting OPEC+ deal as the oil producing cartel faces flagging oil prices and a looming supply crunch.
Brent crude futures were up 36 cents, or 0.5 per cent, at $76.65 a barrel while US West Texas Intermediate crude futures gained 37 cents, or 0.5 per cent, to $72.11. Both benchmarks jumped more than $1 on Monday after Saudi Arabia’s decision over the weekend to reduce output by 1 million barrels per day (bpd) to 9 million bpd in July.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a June 16 expiry, was last trading higher by 0.99 per cent at ₹5,998 per bbl, having swing between ₹5,871 per bbl and ₹5,999 per bbl during the session so far, compared to a previous close of ₹5,939 per bbl.
What weighed on oil markets today?
Chinese export data: China’s exports shrank much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish. The rates fell earlier in the session on weak Chinese economic data and rising US fuel inventories.
Wednesday’s official data also showed that crude oil imports into China – the world’s largest oil importer, rose to their third-highest monthly level in May as refiners built up inventories. “Additional Saudi cuts are expected to deepen the market deficit to more than 3 million bpd in July by some estimates,” PVM Oil’s Stephen Brennock told news agency Reuters.
Rising US inventories: US gasoline inventories, meanwhile, rose by about 2.4 million barrels and distillates inventories were up by about 4.5 million barrels in the week ended June 2, market sources said on Tuesday, citing American Petroleum Institute figures.
The unexpected build in fuel inventories raised concerns over consumption by the world’s top oil user, especially as travel demand grew during the Memorial Day weekend. The US Energy Information Administration (EIA) said that US crude oil production this year would rise faster and demand increases would be slower than previously expected.
The production cuts by the group known as OPEC+ will slightly reduce global oil inventories in each of the next five quarters and boost global oil prices in late-2023 and early-2024, the EIA predicted in its Short-Term Energy Outlook.
What EIA says:
EIA projects US crude oil production will climb by 720,000 bpd to 12.61 million bpd this year, above a prior forecast calling for a gain of 640,000 bpd.
US oil production gains have slowed due to investor demand for increases in dividends and share buybacks over capital spending. But US output is still set to hit annual production records in 2023 and 2024, EIA said.
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Updated: 07 Jun 2023, 04:38 PM IST
