Commodity analysts at ING, Ewa Manthey and Warren Patterson, observed that the oil market extended its downward trajectory for the third consecutive trading session this morning.
Prices Poised for Unprecedented Monthly Decline
West Texas Intermediate (WTI) crude oil has retreated below the $60 per barrel mark, while ICE Brent crude is down approximately 15% this month, positioning both benchmarks to potentially record their largest monthly losses to date. The persistent risks associated with tariffs and the anticipation of OPEC+ easing production restrictions are exerting downward pressure on oil prices. Furthermore, a bearish inventory report released by the American Petroleum Institute (API) has further contributed to the negative sentiment. Market participants are closely monitoring upcoming decisions from OPEC+ regarding potential adjustments to production quotas in the face of fluctuating global demand and supply dynamics.
Overnight figures from the API revealed a substantial increase of 3.8 million barrels in U.S. crude oil inventories for the week ending [Date – Assume Previous Week], a stark contrast to the anticipated draw of 0.8 million barrels. Crude oil stocks at Cushing, Oklahoma, a key delivery hub, rose by 674,000 barrels, indicating a potential build-up in supply at this critical storage location. In terms of refined products, the API’s estimates indicated a decrease of 3.1 million barrels in gasoline stocks, suggesting stronger demand for gasoline. Distillate inventories, which include heating oil and diesel, also experienced a decline of 2.5 million barrels, potentially reflecting increased industrial activity or seasonal heating demand. These inventory figures are closely watched by traders as indicators of the overall health of the oil market and can significantly influence price movements. The official inventory data from the Energy Information Administration (EIA) is due later today and will provide further clarity on the supply and demand situation.
Despite the recent weakness observed in the oil market, demand for crude oil originating from the Middle East appears to be holding steady. Market expectations suggest that Saudi Arabia, the world’s largest oil exporter, is likely to increase its official selling price (OSP) by approximately US$0.3 per barrel for Asian buyers for June deliveries. This potential price increase suggests that Saudi Arabia anticipates continued strong demand from Asia, a key consuming region. This contrasts with the earlier decision by Saudi Arabia to reduce its official selling price for its Arab Light grade into Asia for May loading by US$2.30 per barrel – the most significant reduction since 2022. The earlier price cut may have been a strategic move to maintain market share in the face of increased competition and fluctuating global demand. The upcoming OSP decision will be closely scrutinized by market participants for further insights into Saudi Arabia’s outlook on the oil market.
