Oil Prices Decline Amid Weak U.S. Fuel Demand and Profit-Taking.
Brent crude futures for August delivery, which expired on Friday, closed slightly higher by 2 cents at $86.41 a barrel. The more actively traded September contract declined by 0.3% to $85 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures fell by 20 cents, or 0.24%, to settle at $81.54 a barrel. For the week, Brent saw a marginal increase of 0.02%, while WTI futures dropped by 0.2%. Both benchmarks posted gains of approximately 6% for the month.
Despite an increase in U.S. oil production and demand reaching a four-month high in April, gasoline demand fell to 8.83 million barrels per day, the lowest level since February, according to the Energy Information Administration’s (EIA) Petroleum Supply Monthly report released on Friday.
“The monthly report from the EIA indicated poor gasoline demand,” said Phil Flynn, an analyst at Price Futures Group. “Those numbers didn’t really inspire more buying.”
Analysts noted that some traders took profits at the end of the second quarter after earlier price rallies. The U.S. personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, remained flat in May, raising hopes for interest rate cuts in September.
Despite these developments, the reaction in financial markets was minimal. For oil traders, the release had little impact, according to Charalampos Pissouros, a senior investment analyst at brokerage XM.
Growing expectations of a Federal Reserve easing cycle have triggered a risk rally across stock markets. Traders are now pricing in a 64% chance of a rate cut in September, up from 50% a month ago, according to the CME FedWatch tool. Lower interest rates could boost oil demand by increasing consumer spending.
Related Posts
“Oil prices have been converging with our fair value estimates recently, revealing the underlying strength in fundamentals,” Barclays analyst Amarpreet Singh wrote in a client note. Barclays expects Brent crude to remain around $90 a barrel in the coming months.
Looking ahead, oil prices are anticipated to remain relatively stable in the second half of 2024. Concerns over Chinese demand and potential increases in supply from key producers are expected to balance out geopolitical risks, according to a Reuters poll. The poll predicts Brent crude will average $83.93 a barrel in 2024, with U.S. crude averaging $79.72 a barrel.
Additionally, the U.S. active oil rig count, an early indicator of future output, fell by six to 479 this week, the lowest level since December 2021, as reported by energy services firm Baker Hughes.
Meanwhile, money managers increased their net long U.S. crude futures and options positions in the week ending June 25, according to the U.S. Commodity Futures Trading Commission (CFTC).
