2023-06-22 11:00:10
Oil prices fell on Thursday as hopes of China’s recovery were dampened by less than expected support measures, and high key rates from major central banks rekindled fears about the global economy.
Around 10:40 a.m. GMT (12:40 p.m. in Paris), a barrel of Brent from the North Sea, for delivery in August, lost 1.74% to 75.78 dollars. Its American equivalent, a barrel of West Texas Intermediate (WTI) for delivery the same month, slipped 1.70% to 71.30 dollars.
“Oil prices remain very volatile,” says Craig Erlam, an analyst at Oanda, as investors “try to reconcile weaker Chinese growth, somewhat more modest support from the PBoC (China’s central bank), banks more aggressive power plants” in the face of inflation.
The Chinese central bank had cut two key rates on Tuesday, after several similar measures in recent weeks to try to revive post-Covid growth in the world’s second largest economy, but more moderately than investors expected.
Thursday, the Bank of England should raise its rates for the 13th consecutive time and could even opt for a more marked increase than in recent months due to the resistance of inflation.
However, the increases in the rates of the major central banks have consequences on the demand for oil, because they weigh on the economies by increasing the cost of credit for households and businesses.
“Rising rates are also weighing on the futures price curve, as it is now more expensive to hold a barrel of oil,” the ANZ analysts continued.
At the same time, on the supply side, “the sanctions on Russian oil exports have not limited the supply on the international market much, and exports from Iran and Venezuela have been surprisingly strong”, note ANZ analysts.
Investors are also awaiting the release of the weekly U.S. commercial inventory statement from the U.S. Energy Information Agency (EIA) for the week ended June 16.
The federation of professionals in the sector, the American Petroleum Institute (API), estimated on Wednesday evening that crude inventories had fallen by around 1.2 million barrels last week, and that those of gasoline had increased by approximately 2.9 million barrels. However, API data is considered less reliable than EIA data.
Analysts expect a 450,000 barrel increase in commercial crude reserves and 800,000 barrels of gasoline, according to the median consensus compiled by Bloomberg.
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