Oil has lost steam: Portfolio manager
Oil fluctuated as expanding factory activity in China and progress on a U.S. debt deal compete with persistent concerns over the demand outlook.
West Texas Intermediate hovered near US$68 a barrel after losing around six per cent over the previous two sessions. A private survey showed a slight expansion of Chinese manufacturing activity in May, a surprise improvement that contradicted official data. The House passed debt-limit legislation, sending the measure to the Senate for consideration as a default deadline looms.
Traders will be looking ahead to an OPEC+ meeting over the weekend in Vienna to discuss the group’s production policy. Resilient Russian exports are part of the reason why futures are down around 15 per cent this year, as well as aggressive monetary tightening by the Federal Reserve.
Progress on the debt deal also offset signs of swelling U.S. crude stockpiles. The American Petroleum Institute reported inventories rose by 5.2 million barrels last week, which would be the biggest increase since February if confirmed by government data later.
“Today the market will look to U.S. weekly inventory data and in particular the pace of Strategic Petroleum Reserve selling last week,” said Jens Pedersen, director of oil and commodities research at Danske Bank. “Oil prices are stabilizing after better-than-expected Chinese PMIs and a halt in the recent dollar rally,” he added, referring to the purchasing managers’ index, a measure of economic activity.
The 23-nation OPEC+ alliance faces a divided oil market when it convenes on June 4. Brent crude prices dropping to US$70 or below would create a 60 per cent-70 per cent likelihood of a production cut by some members, Citi analysts including Ed Morse said in a note.
When asked if the group will make additional cuts, Azerbaijan Energy Minister Parviz Shahbazov told reporters in Baku that he didn’t know.
- WTI for July delivery declined 0.04 per cent to US$68.06 a barrel by 10:48 a.m. in London after previously closing at the lowest level since March 20.
- Brent for August slipped 0.04 per cent to US$72.57 a barrel.