FX.co ★ Crude Oil Prices Decline Amidst Worries Over Fed, China

Crude oil prices decreased on Monday after a volatile week earlier that saw Brent crude price oscillating between $83.75 and $87.49 and the WTI crude price ranging between $79.31 and $83.53. Hawkish comments from Fed officials that called for further rate hikes, an unexpected rise in consumer sentiment and strong corporate earnings weakened the outlook for crude oil prices. Anxiety about the economic scenario in China, ahead of key data releases also added to the negative sentiment.

Sentiment for the black fluid has also been impacted by the firmer Dollar. The Dollar Index which measures the Dollar's strength against a basket of 6 currencies increased to 101.67 from 101.55 a day earlier.

Meanwhile, the International Energy Agency in its Oil Market Report for the Month of April released on Friday warned that the cuts announced by OPEC+ could tighten market more than expected. The IEA stated that the surprise OPEC+ supply cuts announced on 2 April risked aggravating an expected oil supply deficit in the second half of 2023 and boosting oil prices. Given the potential for a substantial supply deficit, the IEA warned that consumers currently under siege from inflation would suffer even more from higher prices, especially in emerging and developing economies.

The report sees world oil demand to climb by 2 mb/d in 2023 to a record 101.9 mb/d. Demand from the non-OECD countries is expected to account for 90 percent of the growth whilst the demand in OECD countries is seen lower. The report notes that robust gains in China and other non-OECD countries are providing a strong offset for the underwhelming oil demand in developed nations slowed by warmer weather and sluggish industrial activity.

The Oil Market Report also expects global oil production growth for the year as a whole, slowing to 1.2 mb/d versus 4.6 mb/d in 2022. The decline comes in the backdrop of the latest OPEC+ voluntary curbs of 1.16 mb/d, the announced 500 kb/d cut in Russian output from March that has now been extended through the rest of the year, and a 2 mb/d reduction in targets that took effect last November. The report also notes that the growth from the US shale patch, traditionally the most price-responsive source of more output, is currently limited by supply chain bottlenecks and higher costs.

Brent Oil Futures for June settlement traded in a band between $85.64 and $86.52. It is currently at $85.94, down 0.43 percent from the previous close.

West Texas Intermediate Crude Oil Futures for June settlement too traded tight, between a high of $82.61 and a low of $81.78. The current price of $82.08 represents a loss of 0.42 percent from the previous close.