Crude oil prices saw significant declines recently, influenced by the Federal Reserve’s hawkish policy stance. West Texas Intermediate (WTI), the benchmark for US crude, dropped by $1.09, settling at $77.57 per barrel for July delivery.
Brent crude also experienced a decrease, falling by $0.98 to $81.90 per barrel for July delivery. The release of the Fed’s minutes, which indicated a tough stance on future rate hikes, weighed heavily on the market, causing oil prices to retreat.
Mixed Signals: Rising Gasoline Demand vs. Cushing Stockpiles
The market reaction to the Fed’s minutes wasn’t the only factor influencing oil prices. Earlier in the session, data showing rising gasoline demand and a smaller-than-expected increase in US crude inventories initially provided some support. However, the report also had bearish elements, such as the rise in stockpiles at the Cushing, Oklahoma hub to the highest level in ten months. This mixed data contributed to the overall downward trend in oil prices.
Inventory Skepticism as Brent Spread Nears Contango
Traders treated the overall inventory buildup with some scepticism, particularly due to the report’s adjustment factor, which essentially represents its margin of error, reaching the highest level since November. This raised doubts about the accuracy of the inventory data. Additionally, signs of physical market weakness emerged, with the Brent prompt spread moving close to a bearish contango and the Brent differential recently turning negative. European inventories also expanded, as reported by Genscape data, further signalling potential oversupply issues.
Brent Up 6% YTD Despite Geopolitical Tensions
Despite the recent downturn, Brent crude remains about 6% higher this year, reflecting some underlying strength in the market. However, geopolitical risks continue to pose significant threats. Recent drone strikes on Russian refineries and a missile attack on an oil tanker in the Red Sea area highlight the ongoing volatility in the market. These events underscore the delicate balance of supply and demand influenced by geopolitical tensions.
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