The sun rises behind a crude oil storage facility May 5, 2020 in Cushing, Oklahoma. Oil prices fell on Wednesday after rising in the previous three sessions, but losses were limited as global supply tightening will continue as big producers such as Saudi Arabia have little room to increase their production.
Johannes Eisele | AFP | Getty Images
Oil prices fell on Wednesday after rising in the previous three sessions, but losses were limited as global supply tightening will continue as big producers such as Saudi Arabia have little room to increase their production.
U.S. West Texas Intermediate (WTI) crude futures fell 44 cents, or 0.4%, to $111.32 a barrel at 0150 GMT, giving up earlier gains.
Brent futures for August fell 61 cents, or 0.5%, to $117.37 a barrel, also reversing an earlier gain. The August contract will expire on Thursday and the more active September contract was at $113.14, down 66 cents, or 0.6%.
Brent and WTI both rose more than 2% on Tuesday as worries about tight global supply outweigh fears of a slowdown in demand in a potential future recession. The agreement of the Group of Seven economic powers to explore ways to cap the price of Russian oil also supported market sentiment.
“Investors made position adjustments, but remained optimistic on expectations that Saudi Arabia and the United Arab Emirates would not be able to significantly increase production to meet the recovery in demand. , driven by a recovery in jet fuels,” said Hiroyuki Kikukawa, managing director of research at Nissan Securities.
“Oil prices are likely to stay above $110 a barrel, also on fears of potential supply disruptions from hurricanes as the United States enters summer,” he said. .
Saudi Arabia and the United Arab Emirates were considered the only two members of the Organization of the Petroleum Exporting Countries (OPEC) with spare capacity to compensate for the loss of Russian supply and weak production from other member countries. .
But UAE Energy Minister Suhail al-Mazrouei said on Monday the emirate was producing near its quota’s maximum capacity of 3.168 million barrels per day (bpd) under the deal. with OPEC and its allies, collectively called OPEC+.
His comments confirmed remarks by French President Emmanuel Macron who told US President Joe Biden on the sidelines of the G7 meeting that the UAE was producing at maximum capacity and that Saudi Arabia could increase production by just 150,000. bpd, below its design reserve capacity of approximately 2. million bpd.
OPEC’s oil revenues jumped in 2021 as prices and demand recovered from the worst of the Covid pandemic, while the number of its members’ active rigs showed a modest rebound and new wells completed were declining, according to the group’s data.
Analysts have also warned that political unrest in Ecuador and Libya could also further tighten supply.
US inventory data, however, gave some indication of improved fuel supply. Gasoline inventories for the week ending June 24 increased by 2.9 million barrels and supply of distillate fuel increased by 2.6 million barrels, according to market sources citing figures from the American Petroleum Institute on Tuesday. However, crude inventories fell by 3.8 million barrels.
According to Reuters polls, crude oil inventories in the United States are expected to have fallen over the past two weeks. The government’s weekly report on the state of oil last week was delayed due to a hardware issue. Data for both weeks will be released together on Wednesday.