Image: Reuters Berita 24 English - Following three sessions of gains, oil prices dipped on Wednesday, but losses were contained due to the ...
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| Image: Reuters |
Berita 24 English - Following three sessions of gains, oil prices dipped on Wednesday, but losses were contained due to the belief that the global supply shortage will persist because there is no room for large producers like Saudi Arabia to increase production.
Earlier gains were given up as U.S. West Texas Intermediate (WTI) oil futures dropped 44 cents, or 0.4 percent, to $111.32 a barrel at 0150 GMT.
In addition to reversing an earlier gain, Brent crude futures for August decreased by 61 cents, or 0.5 percent, to $117.37 per barrel. Thursday marks the expiration of the August contract, while the more active September contract was down 66 cents or 0.6 percent at $113.14.
As worries over a constrained global supply surpassed worries that demand would decrease in a potential future recession, both Brent and WTI increased by more than 2% on Tuesday. The Group of Seven economic countries' decision to investigate options for capping the price of Russian oil further supported market mood.
According to Hiroyuki Kikukawa, general manager of research at Nissan Securities, "Investors made position adjustments but remained bullish on expectations that Saudi Arabia and the United Arab Emirates would not be able to significantly increase output to meet recovering demand, driven by a pick-up in jet fuels."
As the United States approaches the summer, he predicted that oil prices "would probably stay above $110 a barrel, particularly on worries about potential supply interruptions due to hurricanes."
According to some observers, Saudi Arabia and the United Arab Emirates are the only two OPEC members with extra capacity to make up for lost Russian supplies and subpar performance from other members.
Suhail al-Mazrouei, the energy minister for the UAE, claimed on Monday that the emirate was producing close to its allotted 3.168 million barrels per day (bpd) under the terms of the deal with OPEC and its allies, collectively known as OPEC+.
His statements corroborated those of French President Emmanuel Macron, who informed US President Joe Biden at the G7 summit that Saudi Arabia could only boost output by 150,000 bpd, below its nominal spare capacity of over 2 million bpd, because the UAE was operating at maximum capacity.
Data from the organisation showed that despite the number of its members' active rigs registered a slight return and new completed wells decreased, OPEC's oil revenue increased in 2021 as prices and demand rebounded from the worst of the COVID pandemic.
Analysts also cautioned that political upheaval in Libya and Ecuador could further restrict supply.
However, the U.S. inventory statistics did give some indication of an increasing gasoline supply. According to market sources citing American Petroleum Institute data on Tuesday, gasoline stockpiles grew by 2.9 million barrels and distillate fuel stocks jumped by 2.6 million barrels for the week ending June 24. But crude stockpiles decreased by 3.8 million barrels.
Reuters polls predict that over the past two weeks, U.S. crude inventories have decreased. Last week, a hardware problem prevented the government from releasing its weekly report on the status of petroleum. On Wednesday, the statistics from both weeks will be released at once.
