Oil prices experienced a decline on Thursday amid concerns over demand, elevated by unexpected increases in U.S. crude and fuel inventories. Investors remain cautious as discussions continue regarding the Iran-U.S. nuclear talks.
Brent crude futures dropped by 47 cents, or 0.72%, closing at $64.44 per barrel, while U.S. West Texas Intermediate (WTI) crude fell 37 cents, or 0.6%, settling at $61.20.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are reportedly considering a significant production increase in their upcoming meeting on June 1. Discussions include the possibility of raising output by 411,000 barrels per day (bpd) for July, though no final agreement has yet been reached.
Harry Tchiliguirian from Onyx Capital Group remarked on market reactions, indicating a potential shift in OPEC’s strategy from defending prices to focusing on market share. This has implications for the overall stability in oil pricing as the group works to unwound previous output cuts, with as much as 2.2 million bpd potentially being added to the market by November.
RBC Capital analyst Helima Croft highlighted that a production increase of 411,000 bpd remains the most likely scenario, particularly driven by Saudi Arabia. She also noted the importance of whether the voluntary cut will be fully utilized before the seasonal shifts occur in various regions.
Recent data from the Energy Information Administration (EIA) revealed a surprising rise in U.S. crude and fuel inventories. Crude stockpiles increased by 1.3 million barrels to 443.2 million barrels for the week ending May 16, contradicting analysts’ expectations of a reduction. This buildup is expected to further exert downward pressure on oil prices.
As OPEC+ continues its evaluations, a rise in the yield on 10-year U.S. Treasury bonds indicates a complex dynamic in the market, suggesting the potential for an increase in oil supply amid decreasing demand.
Overall, while the market is facing uncertainties and pressures, the situation may also lead to opportunities for U.S. exports to Europe and Asia, showcasing the resilience and adaptability of market players amidst fluctuating conditions.