Early on Thursday, oil prices slipped as US oil inventories were reported to jump higher than expectations, diminishing hopes of a smooth demand recovery after the coronavirus-related lockdown in the country.
Brent crude oil futures went down by 2.3% or 78 cents at USD33.96/barrel at 00.19 GMT while US WTI crude futures dropped by 3% or 97 cents after reaching a fall by 5% to a low of USD31.14/barrel.
Prices dove in reaction to the stockpiles report from the American Petroleum Institute (API) for the week ended May 22, showing that crude inventory soared by 8.7 million barrels, way beyond analysts’ forecasts of a 1.9 million barrels fall.
Likewise, gasoline stocks climbed by 1.1 million barrels, more than tenfold the predictions. Diesel and heating oil inventories increased by 6.9 million barrels or four times as much as estimated.
The readings signaled that the progressing demand recovery is yet to be strong enough to be really self-sustaining.
Other than that, the market is also concerned about the budding tensions between Saudi Arabia and Russia, the world’s biggest producers, even after the two countries’ leaders have agreed on further close coordination on the oil supply cut pact.
There is uncertainty about Russia’s commitment to the pact, ahead of the meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on June 9.
OPEC+ is eagerly watching US shale oil producers, on whether they boost production with WTI holding above USD30/barrel. They have breakeven prices in the high of USD20 and low USD30 per barrel.
Lachlan Shaw of National Australia Bank opined that there is fear that those shale producers would reopen closed wells and pour more supply to the market, leading to a new glut.
