Mubasher: Oil prices dropped by more than 2% on Wednesday, dragged down by a softer demand outlook and a surge in US crude stockpiles, despite the expected extension of the supply restraints led by the world’s top producers, according to Reuters.
By 8:52 am GMT, US Nymex crude futures dropped by 2.65% to $51.86 per barrel (pb), while global benchmark Brent futures fell by 2.44% to $60.77 pb.
The Energy Information Administration (EIA) slashed its projection for oil demand growth this year by 160,000 barrels per day (bpd) to 1.22 million bpd, while lowered its estimate for the US crude output by 140,000 to 12.32 million bpd.
Adding to the bearish picture was a surprise build-up of 4.9 million barrels in US crude inventories in the week ended 7 June to 482.8 million barrels, the American Petroleum Institute (API) said on Tuesday. This compared with forecasts for a decline of 481,000 barrels.
It is worth noting that the EIA is due to announce its official data later in the day.
Worries about the climbing supply were accompanied by the trade tensions between the US and China, the world’s top two crude consumers.
US President Donald Trump on Tuesday said he was holding up a trade pact with Beijing.
Nevertheless, “oil prices have struggled to retain bullish gains as traders stay cautious over heightened geopolitical risks and persistent weakness in the global economic backdrop,” Singapore-based Phillips Future commodities analyst Benjamin Lu was quoted by Reuters.
In the meantime, markets are looking to whether the members the Organization of the Petroleum Exporting Countries (OPEC) along with their allied producers, including Russia, will maintain their supply curbs in place.
The so-known OPEC+ alliance has trimmed their crude production by 1.2 million bpd since the beginning of the year in a bid to shore up prices.
Energy minister for the UAE Suhail bin Mohammed Al Mazroui on Tuesday said that the group is almost close to an agreement to sustain output cuts.
This came in line with what was projected in a Goldman Sachs note, in which the US bank projected that OPEC-led supply curbs will be extended amid uncertain macroeconomic outlook and volatile output from Iran.