Oil fell as the latest economic report revealed the slowing effects of monetary tightening and put demand concerns at the forefront of the market.
West Texas Intermediate fell the most in a month to fall below $80 after being pressured by a dollar to the upside and dampened risk appetite throughout the session. A Federal Reserve economic survey late Wednesday showed the U.S. economy stagnated in recent weeks with slowing hiring and inflation and reduced access to credit.
While the report likely bolsters the chances that the Federal Reserve will ease its policy of interest rate hikes, the demand implications are unsettling the crude oil market. A report showing the US drew from the nation’s oil reserves failed to allay concerns.
“The market is focused on demand for products and this report will not ease concerns that demand is fragile,” said Rebecca Babin, senior energy trader at CIBC Private Wealth, referring to the data from the Administration energy information. “Those numbers weren’t bad, but they weren’t good enough to keep traders sleeping well at night.”
National inventories fell 4.6 million barrels last week. Total demand was up “but not really where it matters,” said Emily Ashford, executive director of Energy Research, noting that gasoline demand fell and diesel consumption was effectively flat.
Prices:
- WTI for May delivery was down $1.70 to settle at $79.16 in New York.
- Brent for June settlement fell $1.65 to settle at $83.12 a barrel.
Despite the pullback, crude oil is still rising from a 15-month low hit in mid-March after the turmoil in the banking sector. A surprise announcement by OPEC+ on production cuts and reduced Iraqi flows pushed oil back to $80. The producer group is seeking to force consumers to pull oil from storage and bolster prices amid tentative growth in demand.
(with help from Natalia Kniazhevich)
