Crude oil prices began the week with a decline on signs of slowing fuel demand and yet more indications from the Fed that rate cuts are not coming soon.
Brent was trading below $83 per barrel and West Texas Intermediate was a little above $78 a barrel earlier today after shedding 1% on Friday, after the EIA reported builds in gasoline and distillate inventories and analysts reiterated expectations about delays in rate cuts.
The EIA reported modest increases in gasoline and middle distillate stocks for the week to May 3, with gasoline adding 900,000 barrels and distillates rising by 600,000 barrels a week before the start of summer driving season.
Bloomberg, meanwhile, noted in a report that the latest inflation data from China had contributed to the oil demand pessimism, while Reuters interpreted the numbers as suggesting a rebound in consumer demand.
The latest Chinese CPI reading came in at an annual 0.3% for April, with core inflation up by 0.7% during the month.
“The prices data suggests that domestic demand is recovering, supply and demand continues to improve and the outlook for domestic demand and price recovery is optimistic,” a China Everbright Bank analyst told Reuters, adding that “However, consumer prices remain low and the industrial manufacturing sector is still under pressure, reflecting insufficient effective demand and that recovery in the sector is still not sufficiently balanced.”
On the other hand, most analysts expect OPEC+ to keep its production cuts in place at its next meeting in early June, suggesting some floor for prices despite the combination of bearish factors. These expectations prompted IEA’s head, Fatih Birol, to warn OPEC about the link between high oil prices and inflation.
“It’s up to them to decide what they’re going to do, but at this very fragile situation of the global economy, the least that the countries, especially oil-importing developing countries would need is high oil prices, which in turn would push the inflation numbers up,” Birol said last week.
By Irina Slav for Oilprice.com
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