West Texas Intermediate falls as stockpiles grow
Aerial view of Olmeca oil refinery belonging to the Petroleos Mexicanos (PEMEX) company, located in Paraiso, Tabasco state, Mexico, May 20, 2024.
Yuri Cortez | Afp | Getty Images
Crude oil futures fell Thursday after rising U.S. stockpiles sent a bearish signal to the market and the Federal Reserve dialed back interest rate cut expectations for the rest of the year.
Still, oil prices have gained 3% this week, recovering from a sell-off on the OPEC+ plan to increase production in the fourth quarter. Oil market analysts generally viewed the sell-off last week as an overreaction.
Here are today’s energy prices:
- West Texas Intermediate July contract: $77.88 per barrel, down 62 cents, or 0.79%. Year to date, U.S. crude oil has gained 8.6%.
- Brent August contract: $82.07 per barrel, down 53 cents, or 0.64%. Year to date, the global benchmark is ahead 6.5%.
- RBOB Gasoline July contract: $2.38 per gallon, down 0.36%. Year to date, gasoline is up 13.4%.
- Natural Gas July contract: $2.97 per thousand cubic feet, down 2.3%. Year to date, gas has advanced 17.9%.
The Fed left its fed funds rate unchanged on Wednesday and penciled in just one reduction this year, down from three previously. Lower interest rates typically boost economic growth and lift crude oil demand. Fewer cuts this year potentially mean less upside for crude.
The U.S. reported a surprise oil stockpile build of 3.7 million barrels, whereas analysts had expected inventories would fall. Gasoline inventories rose by 2.6 million barrels as fuel demand remains soft.
“The market reaction and the respectable advance in oil prices indicates that rising demand and the subsequent fall in the volume of oil stored worldwide is the question of when and not if,” Tamas Varga, analyst at oil broker PVM, said in a Thursday note.
“But just like the lowering of interest rates, it will come later than anticipated and the path higher will not be a straight line,” Varga said.
A growing number of analysts see the oil market tightening at least through the third quarter before loosening in 2025. Peter Low, an analyst at Redburn Atlantic, sees an oil deficit of 1.7 million barrels per day, or bpd, in the third quarter and 1.5 million bpd in the fourth quarter, before becoming a surplus next year.