Oil prices slide 1% to 11-week low on weaker IEA 2024 demand forecast
Crude prices slid about 1% to an 11-week low on Wednesday after data from the International Energy Agency (IEA) showed oil demand in developed countries likely would flag this year.
Brent futures fell 62 cents, or 0.8%, to $81.76 a barrel by 10:59 a.m. EDT (1459 GMT), while U.S. West Texas Intermediate (WTI) crude fell 60 cents, or 0.8%, to $77.42. That pushed both crude benchmarks into technically oversold territory and put both on track for their lowest closes since Feb. 23.
The IEA trimmed its forecast for 2024 oil demand growth by 140,000 barrels per day (bpd) to 1.1 million bpd, largely citing weak demand in Organization for Economic Co-operation and Development (OECD) nations. OECD is a group of mostly wealthy countries.
Oil demand in those countries contracted in the first quarter of this year, the IEA added.
That futures price decline came despite a bigger-than-expected withdrawal of crude from U.S. storage last week and U.S. inflation data that supported analysts’ expectations for a couple of U.S. Federal Reserve (Fed) interest rate cuts later this year. U.S. consumer prices increased less than expected in April, suggesting inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations that the Fed will cut interest rates in September. Those expectations were further bolstered by other U.S. data showing retail sales were unexpectedly flat last month as inflation-weary consumers cut back spending at online retailers and auto dealerships. Lower interest rates would reduce borrowing costs for businesses and consumers and could spur economic growth and demand for oil.
Also in the United States, the Energy Information Administration (EIA) said energy firms pulled a bigger-than-expected 2.5 million barrels of crude from stockpiles during the week ended May 10.
That compares with the 0.5-million barrel withdrawal analysts forecast in a Reuters poll and the 3.1-million barrel decline shown in data from the American Petroleum Institute (API), an industry group.
In another development, the Organization of the Petroleum Exporting Countries (OPEC) and its allies like Russia, a group known as OPEC+, is likely to hold its June 1 oil policy meeting online, four OPEC+ sources said, rather than in Vienna as currently scheduled.
“After (the second quarter), we expect oil will become bearish as a result of non-OPEC supply growth, decreasing OPEC+ space capacity and softer-than-anticipated demand due to persistent inflation,” Macquarie global oil and gas strategist Vikas Dwivedi said.
FIGHTING IN UKRAINE AND GAZA
In Russia, President Vladimir Putin said Russian forces were improving their positions every day along the front in Ukraine in all directions. Russia has been pushing Ukrainian forces back at key points along the front line in recent months despite hundreds of billions of dollars worth of aid from the United States and its allies.
The United States is rushing ammunition and weapons to the front lines in Ukraine, U.S. Secretary of State Antony Blinken said during a visit to the country.
In Gaza, Israeli troops fought militants, including in the southern city of Rafah that had been a refuge for civilians, in an upsurge of the more than seven-month war that has killed tens of thousands of Palestinians.