The Organization of the Arab Petroleum Exporting Countries, “OAPEC”, released weekly developments in global oil markets, with crude oil futures posting weekly losses of around 2.2% for Brent crude and around 2.9% for West Texas Intermediate crude. The lowest amount in three months.
One of the most important factors driving the decline in crude oil prices is the oil market approaching contango, a state where the value of crude oil futures contracts rises above the value of near-maturity contracts. In the month, concerns about immediate commodity shortages subsided, and then oil-saving energy companies began.
An unexpected rise in U.S. commercial crude inventories to 1.8 million barrels for the first time in three weeks was the most important factor behind the oil price decline, the report continued.
Against a backdrop of persistent inflation, the report said expectations the US Federal Reserve would keep interest rates high for a longer period of time could lead to a slowdown in economic activity and reduced demand from the biggest global oil consumer.
Other factors that contributed to the decline in crude oil prices included expectations that the OPEC+ group would maintain its current production policies and extend voluntary cuts by an additional 2.2 million barrels per day through the second half of 2024.
The report continued as U.S. gasoline stocks fell for a second week in a row as supplies rose, an indicator of demand, to their highest level since early November 2023 by about 9.3 million barrels. Refineries rebounded, bringing their operating rate to 91.7% for the current year, and suppliers stockpiled gasoline ahead of the Memorial Day holiday, which is considered the start of the summer driving season.
