Oil prices fell more than a dollar a barrel on June 9 to record a second straight weekly decline, as weak Chinese factory output data added to doubts about demand growth after Saudi Arabia’s weekend decision to cut output. Oil prices had risen earlier in the week, due to Saudi Arabia’s pledge to cut more output on top of the cuts agreed earlier with the Organization of the Petroleum Exporting Countries and its allies or OPEC+.
Brent crude futures fell $1.17, or 1.5 per cent, to settle at $74.79 a barrel, while the US West Texas Intermediate crude fell $1.12, or 1.6 per cent, to $70.17 a barrel. Both benchmarks lost more than $3 on Thursday after reports claimed that a US-Iran nuclear deal was imminent and would result in more supply. Prices pared losses after both countries denied the report, ending about a dollar a barrel lower.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a June 16 expiry, settled lower by 1.34 per cent at ₹5,824 per bbl, having swung between ₹5,809 and ₹5,926 per bbl during the session so far, compared to their previous close of ₹5,903 per bbl. Overall, a rise in US fuel stocks and weak Chinese export data have weighed on the markets.
What affected oil prices?
US-Iran deal: Regional media including Israel’s Haaretz said that Iran and the US have made progress in talks over the Islamic Republic’s nuclear program. Any agreement to restore the 2015 nuclear deal, which the Trump administration voided, would likely include the US waiving sanctions on purchases of Iranian oil, potentially releasing a flood of exports.
China’s output data: China’s factory gate prices fell at the fastest pace in seven years in May and quicker than forecasts, as the faltering demand weighed on a slowing manufacturing sector and overshadowed hopes of economic recovery.
Some analysts also expect oil prices to rise if the US Federal Reserve pauses hiking interest rates at its next meeting over June 13-14. The Fed’s decision may also influence Saudi Arabia’s next move, according to analysts.
What analysts say:
“The important thing is that despite those changes (Saudi, US-Iran) to output, oil remains below $80, no doubt much to the disappointment of the Saudis,” OANDA analyst Craig Erlam told news agency Reuters. “What comes next may well depend on the inflation data and interest rate decisions over the coming weeks,” he added.
“As we move deeper into the summer driving season in the Northern Hemisphere, demand will be a key factor in determining whether limited inventories must drive prices higher, or soft demand leads to lower prices,” said Rob Haworth, senior investment strategist at US Management.
“The Saudi cut lifted prices slightly, and then the chatter of the potential return of Iranian barrels saw a large drop. Long investors are likely on the sidelines until larger oil inventory declines become visible,” “Thursday’s price moves show how fragile oil is,” said UBS analyst Giovanni Staunovo told Reuters.
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Updated: 10 Jun 2023, 03:05 PM IST