Unexpected Rise in US Crude Stocks Leads to Dip in Oil Prices
Oil prices experienced a slight dip on Wednesday, following an unexpected increase in US crude stocks. This unexpected rise signals a weak demand to markets that are already concerned about a potential recession and disappointing economic data from China.
Brent and West Texas Intermediate Crude Prices
Brent futures saw a decrease of 27 cents, or 0.4%, settling at $74.01 a barrel. Similarly, the US West Texas Intermediate (WTI) crude was priced at $69.13 a barrel, down by 29 cents, or 0.4%. Despite this dip, both benchmarks had climbed over 3% on Tuesday, buoyed by hopes of increased fuel demand after China’s central bank lowered a short-term lending rate.
Concerns Over Chinese Economy
However, concerns about the Chinese economy persist, especially after last week’s disappointing economic data. This led to a 4% drop in prices on Monday.
Unexpected Increase in US Crude Oil Stocks
Contrary to the average estimate for a 510,000 million barrel decline, US crude oil stocks rose by about 1 million barrels in the week ended June 9. This data, cited from the American Petroleum Institute figures, has added to the market’s uncertainty. Further government data on stockpiles is expected later in the day.
Federal Reserve Meeting and Interest Rate Hikes
Market participants are also closely watching the Federal Reserve meeting, which does not have a pre-determined interest rate hike on the agenda. Rate hikes strengthen the dollar, making commodities denominated in the US currency more expensive for holders of other currencies, thereby weighing on prices.
Global Central Banks’ Actions
Economists expect the Bank of Canada to raise interest rates again in July to 5.00% after a surprise 25 basis point increase last week. The European Central Bank is also expected to hike interest rates by another quarter percentage point on Thursday to tame stubborn inflation. However, the Bank of Japan, which will announce its plan on Friday, is expected to maintain its ultra-loose policy.
OPEC+ Decision
In other news, OPEC+ has granted Russia a slightly higher oil production baseline, meaning Russia can produce more under the latest quotas than previously agreed.