Oil prices dropped by over $2 per barrel on Monday to reach multi-month lows, fueled by investor concerns regarding the demand trajectory. The complex OPEC+ output decision signaled a willingness among member countries to increase crude exports.
On Sunday, OPEC+ extended the majority of its significant oil output reductions until 2025, while allowing gradual easing of voluntary cuts among eight core members starting from October. Additionally, the group set a new output objective for the United Arab Emirates, which had been advocating for higher quotas.
Brent crude futures dropped $2.76, or 3.4 per cent, to reach $78.35 per barrel by 11:37 a.m. ET (1539 GMT). U.S. West Texas Intermediate crude futures also declined by $2.80, or 3.6 per cent, settling at $74.19 per barrel. These figures mark the lowest point for both contracts since early February.
“Crude oil prices experienced significant volatility over the past week, dropping ahead of the upcoming OPEC+ meeting and a surprising decline in U.S. gasoline demand. According to the U.S. Energy Information Administration (EIA), U.S. crude oil inventories fell by 4.2 million barrels last week, surpassing the expected decline of 1.6 million barrels. Despite the peak summer driving season, gasoline demand unexpectedly decreased by about 2% from the previous week to 9.15 million barrels per day. This drop in demand led to U.S. gasoline futures hitting three-month lows,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
What’s weighing on crude oil prices?
Indications of a slowdown in demand expansion have put pressure on oil prices, with attention now turning to the data regarding U.S. fuel consumption.
The U.S. Energy Information Administration is set to unveil its projections for oil inventories and fuel usage on Wednesday, shedding light on the extent of gasoline consumption over the Memorial Day weekend, marking the kickoff of the U.S. driving season.
“Crude oil prices also declined in anticipation of the OPEC+ meeting scheduled for Monday. A recovery in the dollar index contributed to the decrease in oil prices. However, easing inflation in the U.S. and a potential rise in demand during the peak summer driving season could provide support for oil prices at lower levels. We expect crude oil prices to remain volatile in today’s session. Crude oil has support at $76.60–76.10 and resistance at $77.90-78.70 in today’s session,” Kalantri added.
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Published: 03 Jun 2024, 10:20 PM IST