Crude oil prices fall in early trade

15 May 2023 , 08:25 AM

Expectations of tightening supply from potential OPEC+ cuts and a restart of U.S. buying for reserves were tempered by worries about fuel consumption at the world’s two largest oil consumers, the U.S. and China. Oil prices fell on Monday.

Brent crude futures were down 43 cents, or 0.6%, to $73.74 per barrel, while U.S. West Texas Intermediate crude was down 37 cents, or 0.5%, to $69.67 per barrel.

Last week, both benchmarks experienced their longest run of weekly drops since September 2022, falling for a fourth straight week. The reason for this was worries that the United States may experience a recession due to the ‘significant risk’ of a historic default within the first two weeks of June.

Investors sought safe havens, such as the U.S. dollar, which strengthened the currency and increased the price for commodities denominated in dollars leading to a fall in prices.

However, as OPEC+, the Organisation of the Petroleum Exporting Countries, and their allies, notably Russia, continue to cut output, crude oil supply may become more scarce in the second half.

According to calculations by Reuters, the group indicated in April that some members will reduce output by an additional 1.16 million barrels per day, bringing the total amount of cutbacks to 3.66 million bpd.

However, according to Iraq’s oil minister Hayan Abdel-Ghani, the group’s next meeting in June is not expected to result in further limits to oil production.

After completing a sale required by Congress in June, the United States could begin repurchasing oil for the Strategic Petroleum Reserve (SPR), Energy Secretary Jennifer Granholm informed legislators on Thursday.

Following this revelation, energy services company Baker Hughes Co. released its weekly report, which revealed that this week’s U.S. oil rig count decreased by two to 586, the lowest level since June 2022, while gas rig counts fell by 16 to 141.

According to officials with direct knowledge of the deliberations who talked to Reuters, the leaders of the Group of Seven (G7) nations may unveil fresh measures at their meetings from May 19 to 21 that target third-country sanctions evasion.

According to the reports, the sanctions’ tightening will also aim to impede Russia’s future energy output and reduce trade that benefits its armed forces.

Since the European Union embargo began in December, India and China, the world’s No. 3 and No. 1 oil importers, respectively, have been the main consumers of Russian petroleum.

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