Oil fell for a third straight day as weak US demand data added to concerns that the global economy is hurtling towards recession.
The recent slide, which has sent West Texas Intermediate down 14% for the year, shows that a plan by OPEC and its allies to regain control of the market by cutting output starting this month is still not working . Brent’s fast spread, which reflects the difference in price between July and August futures, has narrowed to a premium of 15 cents. That’s down from a premium of as much as 43 cents earlier in the week, suggesting traders see short-term supply outstripping demand.
“This is the hardest knife to hold since the pandemic-era rally,” said Daniel Ghali, commodities strategist at TD Securities. The deterioration in Brent’s time spread suggests a “significant drop in commodity demand expectations, with traders implicitly hoping we’re landing. This is the first time recessionary concerns are starting to have a price on energy markets” .
The Federal Reserve raised rates by 25 basis points on Wednesday, hinting at a possible pause in its aggressive tightening campaign, although the news failed to stop crude oil from falling.
Meanwhile, momentum-driven accounts, such as those overseen by commodity trading advisors, have exacerbated volatility, with estimates showing they are maximizing short bets.
Gasoline demand
In the United States, a government report on Wednesday showed gasoline demand had contracted and fuel supplies were rising. Demand for jet fuel also fell, although it remained slightly above year-ago levels.
On the supply side, Russia has shown no sign of a sustained drop in crude oil flows out of the country, despite its pledge to cut output by 500,000 barrels a day. Exports rose to 4 million barrels a day in the week to April 28, a level surpassed only once since the country’s troops invaded Ukraine in February 2022, according to tanker tracking data compiled by Bloomberg.
However, there are concerns that Iran’s seizure of a second oil tanker in a week could disrupt transport on one of the world’s most important trade routes. Pipeline shipments from northern Iraq and its Kurdish region to the Turkish port of Ceyhan remain idle due to a dispute between the two nations.
Prices:
- WTI for June delivery fell $3.06 to settle at $68.60 a barrel in New York.
- Brent for July settlement was down $2.99 at $72.33 a barrel.
