Oil fell on June 28, giving up an earlier gain, as worries over further interest rate hikes and slowing demand offset support from an industry report showing a larger-than-expected drop in U.S. crude inventories.
Benchmark Brent crude prices are down more than 15% this year as rising interest rates hit investor appetite, while China's economic recovery has faltered after several months of softer-than-expected consumption and other data.
At 1348 GMT, Brent was down 43 cents, or 0.6%, to $71.83 a barrel, while U.S. West Texas Intermediate (WTI) crude slipped 12 cents, or 0.2%, to $67.58.
"For now, the market remains stuck with demand concerns weighing," said Ole Hansen, head of commodity strategy at Saxo Bank. "OPEC production cuts have helped prevent a deeper setback."
"Overall, the commodity sector, including crude oil, is suffering from risk adversity amid China growth worries and U.S. data strength pointing to higher rates," he said.
Oil was up earlier in the session, finding support from American Petroleum Institute data showing U.S. crude inventories fell by about 2.4 million barrels. The Energy Information Administration's official supply report is due out at 1430 GMT.
While outright prices were mixed, the discount of the prompt Brent contract to the next month has deepened, a structure called contango which indicates ample supply.
Higher interest rates can weigh on economic activity and oil demand. European Central Bank President Christine Lagarde said on June 27 that stubbornly high inflation will require the bank to avoid declaring an end to rate hikes.
"The weakness is the combination of expectations of further rate hikes as suggested by the ECB president and ample physical supply as manifested in the weakening structure of the two major crude oil futures contracts," said Tamas Varga of oil broker PVM.
Still, some analysts expect the market to tighten in the second half of 2023 partly due to ongoing OPEC+ supply cuts and Saudi Arabia's voluntary reduction for July.
Recommended Reading
Exxon: Longer Laterals, Cube Well Design Lowering Permian Costs
2024-12-11 - Exxon Mobil is boosting spending to grow global oil and gas production by 18% by 2030. U.S. rival Chevron Corp. recently said it’s cutting spending in favor of free cash flow.
Jefferies: With Permian Locked Up, E&Ps Hunt for New L48 Runway
2024-11-26 - With the core of the Permian Basin largely locked up, “intrepid operators” are hunting for runway in more nascent Lower 48 basins and in less developed Permian benches.
'A Renewed Look': Central Basin Platform's Old Rock Gains New Interest
2024-10-29 - As majors prune their portfolios to sell non-core assets, M&A activity is heating up on the Permian’s Central Basin Platform and Northwest Shelf—and Ring Energy hopes to be a buyer.
Exxon’s Custom, Lightweight Proppant Boosts Permian EURs by 15%
2024-12-17 - Exxon is lowering drilling and completion costs, boosting EURs by 15% with custom proppant and considering upside from less developed Permian Basin zones.
Exclusive: Surge Energy Seeks Midland M&A with $1.3B in Dry Powder
2024-11-19 - Surge Energy is one of the largest private oil producers in the Permian Basin. With $1.3 billion in dry powder to put to work, Surge is scouring the northern Midland Basin for M&A, executive Travis Guidry told Hart Energy.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.