Oil prices fell by more than 1%, at the end of trading today, Thursday, March 23 (2023), after a volatile session, to record the first drop in 4 days.
The strong US jobs data reflected bearish signals from Federal Reserve Chairman Jerome Powell, which highlighted risks to the banking sector and swelling US oil inventories.
The US Federal Reserve decided to raise interest rates by 25 basis points, for the ninth time in a row, but hinted that the monetary tightening cycle is nearing the end.
Crude oil prices today
At the end of the session, the price of futures contracts for Brent crude – delivery in May 2023 – fell by more than 1%, to reach $ 75.91 a barrel.
The price of US West Texas crude futures – for May 2023 delivery – fell by 1.3%, to $69.96 a barrel, according to data seen by the specialized energy platform.
Crude oil prices ended their trading, yesterday, Wednesday, March 22, with an increase of about 2%, with the decline of the US dollar.
Oil market conditions
Powell said on Wednesday that stresses in the banking industry could lead to credit risks, with “significant” implications for the economy, which US central bank officials expect to slow more this year than previously thought.
The Bank of England on Thursday followed the Federal Reserve and the Swiss National Bank in raising interest rates in order to fight inflation.
Meanwhile, the number of Americans filing new claims for unemployment benefits last week fell from an already historically low level, and there are no signs yet that the recent financial market turmoil is having an impact on the economy.
The dollar fell to its lowest level in 7 weeks against a basket of other currencies, providing a price floor for oil, as the dollar’s decline makes oil cheaper for holders of other currencies.
“Economic risks were identified at the Fed meeting, while higher-than-expected US oil inventories also dampened some optimism about the demand outlook,” said IG’s market strategist, Yip Kun Rong.
Yesterday, Wednesday, the two benchmarks for oil settled at their highest closing since March 14, after the dollar fell to its lowest level in 6 weeks.
“However, the dollar’s weakness has been a bright spot in promoting some flexibility in oil prices,” adds Yip Jun Rong, noting that there is still room to upside in crude oil prices.
demand for oil
Prospects for demand recovery in China, the world’s largest crude importer, could keep crude prices supported.
Goldman Sachs said today, Thursday, that Chinese demand continued to rise across the commodity complex; The demand for oil exceeded 16 million barrels per day.
Consulting firm Wood Mackenzie said that China is expected to account for about 40% of the increase in global oil demand this year, after easing the measures imposed to confront the Corona virus.
US oil stocks
Meanwhile, the latest data from the Energy Information Administration showed that US crude oil inventories unexpectedly rose last week to their highest levels in nearly two years.
In the week ending March 17, crude inventories rose by 1.1 million barrels to 481.2 million barrels, the highest level since May 2021.
The increase contradicts the expectations of analysts – in a Reuters poll – a decline of 1.6 million barrels.
Citi analysts said, in a weekly report: “Despite all the negative talk about the expectations of oil production growth in the United States for the year 2023, the exaggeration of cost inflation and the decline in capital expenditures, the latest weekly report of the Energy Information Administration confirms the pivotal role of US oil in global oil markets.” .
Analysts added, citing EIA data, that total US exports of crude oil and oil products reached a new level just shy of 12 million barrels per day, far higher than supply levels in any other country.
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