Oil futures: Crude resumes slump despite US stocks draw, economy weighs

Quantum Commodity Intelligence – Crude oil futures Wednesday were again in sharp retreat having given up earlier gains, with broader economic fears countering the unexpectedly large draw in US crude inventories.

June ICE Brent futures were trading at $77.63/b (1850 GMT), compared to the day's range of $77.51-81.47/b and Tuesday's settle of $80.77/b, while the more liquid Jul23 contract was trading at $77.67/b.

At the same time, Jun23 NYMEX WTI was trading $74.19/b versus Tuesday's close of $77.07/b, with crude benchmarks now firmly below levels prior to the announced OPEC+ cuts.

Oil prices initially moved higher after American Petroleum Institute (API) data released late Tuesday showed a drop in US commercial crude inventories of over 5 million barrels last week versus expectations of less than 2 million barrels.

API figures also showed gasoline fell by 1.9 million barrels, although distillate stocks posted a 1.7-million-barrel build.

Prices rebounded from the lows after data from the Energy Information Administration released Wednesday showed a 5 million barrel drop in crude stocks, but again failed to hold the gains.

Earlier markets also found support from bullish demand forecasts from Asia.

"Bookings data from China suggests that this long May Day holiday could see a continued recovery in travel to Asian countries, boosting jet fuel demand. This comes back to the economic recovery in China supporting the demand outlook," said City Index analyst Fiona Cincotta.

Economy

But Cincotta said this was being offset by expectations of more rate hikes in Europe and the US, which is expected to slow growth and raises fears of a recession.

The US consumer confidence index fell in April to 101.3, down from 104.0 in March, the Conference Board said in a statement, which was significantly below the median forecast in a MarketWatch survey of economists.

Consumers' expectations "fell and remain below the level which often signals a recession looming in the short term," Ataman Ozyildirim, senior director of economics at The Conference Board.

"Compared to last month, fewer households expect business conditions to improve and more expect worsening of conditions in the next six months," he added.

Meanwhile, fresh banking concerns emerged as shares in the troubled First Republic bank fell sharply to a record low Tuesday after revealing it lost around 40% of its deposits during Q1.

First Republic's share price almost halved Tuesday, extending its year-to-date losses to over 90%. It closed at $8.10 per share, the lowest closing level on record.