Oil, buffeted by volatility in equity markets, fell the most since mid-March when a banking crisis hit the commodity, wiping out gains from a surprise OPEC+ production cut.
West Texas Intermediate traded in a near $3 range on Wednesday, settling at its lowest level since late March, erasing any gains that came after OPEC and its allies announced a cut of shock production. The commodity largely ignored a bullish inventory report from the Energy Information Administration and instead tracked wild equity swings.
“That’s a strong number,” said Rebecca Babin, senior energy trader at CIBC Private Wealth, referring to the 5.1 million barrel drop in U.S. crude stockpiles. “But it’s not really reflected in price action because the market wants to see how the China demand story plays out and continues to bet that the U.S. will slow significantly in the second half.”
Asian crude market indicators have weakened in recent weeks, while oil refining profits have deteriorated, pointing to lackluster demand for the fuel. As a result, Brent’s rapid spread became contango for the first time since late January, excluding contract expiration dates. The weakening of the spread indicates that traders see short-term supply exceeding demand.
Despite the pullback, crude oil is still rising from a 15-month low hit in mid-March after the turmoil in the banking sector. With concerns about the outlook in markets, traders will be looking to US economic reports later this week for clues on the Federal Reserve’s rate hike path ahead of its May policy meeting.
Prices:
- June WTI fell $2.77 to settle at $74.30 a barrel in New York
- Brent for June settlement fell $3.08 to settle at $77.69 a barrel.
-With the help of Sri Taylor.