Oil futures: Crude sheds early gains, hits 3-mth low of $81.50/b

Quantum Commodity Intelligence – Crude oil futures Thursday shed gains made earlier on Thursday to post its fourth straight bearish session and near levels on the front contract last seen in late February.

Front-month Jul24 ICE Brent futures were trading at $81.55/b (1530GMT), compared to Wednesday's settle of $81.90/b, and after toping $82.9/b in early afternoon trade in Europe.

At the same time Jul24 NYMEX WTI was trading at $77.08/b, versus Wednesday's settle of $77.57/b, and intraday high of $78.66/b.

Markets took a midweek tumble after EIA data showed that commercially held US crude oil stocks increased last week, while inventories at the Cushing storage hub ballooned to the highest levels since last July.

Oil markets have also been weighed down this week by the likelihood of high interest remaining in place as several Federal bank officials cautioned over persistently high inflation.

"The downward pressure on oil was part of a broader risk-off move after the latest Fed minutes supported the higher-for-longer narrative when it comes to monetary policy," said Warren Patterson, head of ING's commodity research.

Those minutes read that "various participants mentioned a willingness to tighten policy further" in case risk of inflation remains high.

"The weakness in oil prices increases the likelihood that OPEC+ members fully roll over their additional voluntary supply cuts into the second half of the year," added Patterson.

However, the build in crude stocks was partially offset by a drop in gasoline inventories, which fell to a one-month low as demand soared to its highest since last November.

Gasoline inventories fell by 950,000 barrels in the week to May 17 to hit 226.8 million barrels, its lowest since early April, but up 5%, or 10.5 million barrels, on the same week last year.

Morgan Stanley on Wednesday trimmed its Brent forecast for Q3 year to $75 from $77.50 per barrel, while the Q4 outlook was cut from $75/b to $70/b.