Oil futures closed lower on Tuesday, June 6, as concerns mounted over the impact of a decelerating global economy on oil demand. The downward pressure overshadowed the positive news of Saudi Arabia’s announcement to further reduce oil production by 1 million barrels per day.
The West Texas Intermediate (WTI) crude futures experienced a decline of 41 cents, equivalent to 0.6%, settling at $71.74 per barrel. Similarly, Brent crude futures dropped by 42 cents, or 0.6%, closing at $76.29 per barrel.
The World Bank recently revised down its global growth forecast for 2024 from 2.7% to 2.4%, citing the lingering effects of tight monetary policies and banking sector crises on the global economy. In contrast, the institution raised its projection for global economic growth in 2023 to 2.1% from 1.7%, but this figure still fell short of the 2022 growth rate of 3.1%.
The US Energy Information Administration (EIA) also adjusted its forecasts, anticipating a slower economic expansion in the United States. The EIA now expects a growth rate of 1.3% for 2023 and 1% for 2024, down from the previous estimates of 1.6% and 1.8% respectively. The agency emphasized that this economic slowdown would impact energy consumption in the US over the next two years.
Adding to the negative sentiment, the strength of the US dollar made crude oil contracts more expensive for investors using other currencies. The dollar index, which measures the greenback against six major currencies, saw a 0.12% rebound to touch 104.1263.
While the reduction in Saudi Arabia’s oil output by 1 million barrels per day since July, from 10 million barrels per day in May, is a significant development, analysts at Citigroup remain skeptical that these production cuts can sustainably drive oil prices above the $80-90 range. The prevailing weak demand, coupled with concerns of a potential recession in the US and Europe, a slowdown in the Chinese economy, and non-OPEC countries ramping up their production, all contribute to the challenging market conditions.
Market participants are closely monitoring the release of China’s May trade data, as China is the world’s second-largest oil importer. Additionally, attention is focused on the upcoming crude inventory report from the US Energy Information Administration (EIA) scheduled for Friday, which will provide further insights into the supply-demand dynamics in the oil market.
The Spot Market is Open
Wednesday, June 7, 2023
| Energy Updated at | USD Price | Change | %Change |
| Crude Oil 11.40 | 71.43 | -0.31 | -0.43% |