Oil Prices Dip Amid Weak US Consumer Sentiment.
Brent crude futures fell by 37 cents to $85.03 a barrel, while U.S. West Texas Intermediate (WTI) crude futures declined by 41 cents, or 0.5%, to close at $82.21 a barrel. For the week, Brent futures recorded a 1.7% drop after four consecutive weeks of gains, and WTI futures saw a 1.1% decline.
A monthly survey by the University of Michigan revealed that U.S. consumer sentiment fell to an eight-month low in July, although inflation expectations improved for the next year and beyond. Meanwhile, the U.S. Labor Department reported that the producer price index (PPI) rose by 0.2% in June, slightly more than expected, due to an increase in service costs. Despite this, investors anticipate the Fed might start cutting rates in September.
“The market isn’t afraid of the Fed at this point,” said Phil Flynn, an analyst at Price Futures Group. Lower rates are expected to boost economic growth, potentially increasing fuel consumption.
Yeap Jun Rong, a market strategist at IG, noted, “Cooling U.S. inflation numbers may support the case for the Fed to kick-start its policy easing process earlier rather than later. It also adds to the series of downside surprises in U.S. economic data, which points to a clear weakening of the U.S. economy.”
Oil prices have been somewhat supported by robust U.S. gasoline demand. Government data showed that U.S. gasoline demand reached 9.4 million barrels per day (bpd) in the week ending July 5, the highest level since 2019 for the week that includes the Independence Day holiday. Additionally, jet fuel demand on a four-week average basis was at its strongest since January 2020.
This strong fuel demand has encouraged U.S. refiners to ramp up activity and draw from crude oil stockpiles, with U.S. Gulf Coast refiners’ net input of crude rising last week to more than 9.4 million bpd for the first time since January 2019, according to government data.
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However, signs of weaker demand from China, the world’s largest oil importer, could counter the positive outlook from the U.S. and put downward pressure on prices. “The recent downside correction is evidently over, although the speed of further ascent might be hindered by falling Chinese crude oil imports, which plummeted 11% in June from the previous year,” said Tamas Varga of oil broker PVM.
The U.S. active oil rig count, an early indicator of future output, fell by one to 478 this week, the lowest since December 2021, according to energy services firm Baker Hughes (BKR.O).
Additionally, money managers increased their net long U.S. crude futures and options positions in the week to July 9, as reported by the U.S. Commodity Futures Trading Commission (CFTC).
