Crude oil futures are slumping in the middle of the trading week, driven by a larger-than-expected increase in US inventories. Oil is also continuing its downward trend on fears that oil-rich nations may restart operations later this summer, which could add to the global supply glut. Is Goldman Sachs’ prediction of a 20% correction coming true?
July West Texas Intermediate (WTI) crude oil futures slipped $0.20, or 0.51%, to $38.72 per barrel at 16:59 GMT on Wednesday on the New York Mercantile Exchange. Despite sliding since topping $40 late last week, US crude prices are still up nearly 6% over the last week. Year-to-date, oil has pared its losses to around 36%.
Brent, the international benchmark for oil prices, is also in the red midweek. August Brent crude futures dropped $0.26, or 0.63%, to $40.92 a barrel on London’s ICE Futures exchange. Brent has advanced close to 4% in the last week, paring its YTD decline to around 38%.
According to the US Energy Information Administration (EIA), domestic stockpiles increased by 5.7 million barrels for the week ending June 5. This is higher than the market forecast of 3.2 million barrels. The EIA also highlighted that crude supplies at the Cushing, Oklahoma storage facility tumbled by 2.3 million barrels.
Gasoline inventories jumped by 900,000 barrels, while distillate supplies surged 1.6 million barrels.
Last week, the Baker Hughes total oil rig count came in at 206, down from 222 in the previous week.
New S&P Global Platts data found that Organization of the Petroleum Exporting Countries (OPEC) members pumped 24.32 million barrels per day (bpd) last month. This accounts for a reduction of five million bpd from the cartel’s baseline output level. Overall, OPEC+ delivered 85% of its agreed output reductions in May.
In April, OPEC and its allies – OPEC+ – agreed to a production cut of 9.7 million bpd, and the group recently extended the agreement until the end of July. But analysts fear that OPEC could scrap the arrangement after July and return to normal capacity. OPEC members have also been blunt about their concern that US producers could increase output if prices normalize to about $50 a barrel.
On Wednesday, the Organization for Economic Cooperation and Development (OECD) published its semi-annual outlook and listed two scenarios. The first is that the global economy could contract 6% if the number of coronavirus cases recedes. The second is that global gross domestic product (GDP) could plunge 7.6% in the event of a second COVID-19 wave. Both grim assessments could impact the oil market since each situation would impact business activity.
In other energy commodities, July natural gas futures surged $0.037, or 2.09%, to $1.804 per million British thermal units (btu). July gasoline futures shed $0.0187, or 1.55%, to $1.1916 a gallon. July heating oil futures were flat at $1.1554 per gallon.