Oil futures: Crude slumps 3% on US concerns, Russia OPEC+ comments
Quantum Commodity Intelligence – Crude oil futures Thursday were in sharp retreat, as concerns over the US economy re-emerged to wipe out the week's gains, while Russia played down the prospect of further OPEC+ cuts.
Jul23 ICE Brent futures were trading at $75.85/b (1750 GMT) compared to the day's high of $78.50/b and Wednesday's settle of $78.36/b and. The more liquid Aug23 contract was at $75.78/b.
At the same time, Jul23 NYMEX WTI was trading $71.64/b, versus Wednesday's close of $74,34/b.
Oil markets had neared monthly highs after this week's comments from Saudi Arabia's energy minister telling oil speculators to "watch out," which was seen as a strong signal the OPEC kingpin is willing to take further action on production levels.
However, markets remained jittery as US debt-ceiling talks stumbled, while the prospect of further rate hikes remains a possibility.
The urgency was highlighted as Fitch Ratings, one of the big three agencies, announced it had placed the United States' triple-A status on "rating watch negative."
House Speaker Kevin McCarthy said negotiations with the White House over raising the US debt limit were stalled over a disagreement on future spending.
Meanwhile, US Federal Reserve economists still expected a "mild recession" at the most recent interest-rate meeting earlier this month, according to minutes of the last meeting, while Fed Governor Christopher Waller said he wouldn't back an end to interest-rate increases without clear signs that inflation is headed toward the central bank's target.
"I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2% objective. But whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks," said Waller.
Prices also dropped after Russian Deputy Prime Minister Alexander Novak said Thursday he does not expect output changes from current levels when OPEC+ meets in Vienna on 4 June.
Also weighing on commodities, the Dollar Index smashed through 104 points for the first time since mid-March, making dollar-denominated oil imports more expensive.
Inventories
US crude oil stocks saw a bigger-than-expected draw last week, slumping by over 14 million barrels to touch their lowest level since the start of the year, according to data from the EIA published Wednesday.
That included a 12.5-million-barrel drop for commercial crude stocks to 455 million barrels, the lowest figure since early February.
US gasoline stocks also fell to a near-decade seasonal low last week, EIA data showed, as demand ramped up in the final days before the start of the summer driving season.
Gasoline inventories drained another 2 million barrels or 0.9% in the week to 19 May, hitting a fresh six-month low of 216.3 million barrels.
"The petroleum inventories are suggesting that we are going headlong into a supply deficit. Gasoline inventories also plunged this week even though refiners were running straight out, increasing gasoline production to 10.3 million bpd," said Phil Flynn of The Price Futures Group.
Gasoline refining margins basis New York Harbor are now at their widest since last July, as several unplanned refinery halts lifted June RBOB gasoline futures towards $40/b over ICE Brent, up over $7/b in the last week.
