Oil prices today: Oil trades flat due to tight supply coupled with fuel demand

Brent crude futures were last down 2 cents at $73.91 a barrel, while US West Texas Intermediate crude was up 4 cents at $69.34 a barrel. Last week, both the oil benchmarks fell for the fourth week in a rowThe United States could enter recession in early June amid the risk of a historic default, the longest streak of weekly declines since September 2022.

Read also: Oil falls for fourth weekly drop on concerns over demand growth in US, China; what does opec say

“With an uneven reopening in China and concerns that the US is facing a growth slowdown at a time when the ex-date for the debt ceiling is fast approaching, the US dollar edged up sharply, with crude oil Per market sentiment remains the best,” IG analyst Tony Sycamore told Reuters.

Major triggers for the oil market:

OPEC+ cuts to strengthen global crude supply: Global crude supplies may tighten in the second half as OPEC and its allies, including Russia – known as OPEC+ – pursue additional production cuts that reduce sour crude availability. In April, OPEC surprisingly announced that some members would cut production by about 1.16 million barrels per day, bringing the total amount of cuts to 3.66 million bpd, according to Reuters.

Oil analysts expect the oil cartel to announce another production cut next month, which could be another blow to the oil market and result in a sudden rise in prices across all markets. However, according to Iraq’s Oil Minister Hayan Abdel-Ghani, Iraq does not expect OPEC+ to further cut oil production at their next meeting on June 4.

G7 to target Russian oil in new sanctions At their summit in Japan this week, leaders of the Group of Seven nations (G7) plan to tighten sanctions on Russia, aimed at energy and exports that support Russia’s war effort.

The new measures, announced by the leaders during the May 19-21 meetings, will target evasion of sanctions linked to third countries, and curb business that supports Russia’s military, slashing Russia’s future energy production and will be tried. According to the Paris-based International Energy Agency (IEA), the move to deprive Moscow of funding will create further uncertainty for oil markets and put pressure on oil prices, including diesel.

The IEA said, “A proposed oil price cap could help ease tensions, yet myriad uncertainties and logistical challenges remain… The range of uncertainty has never been greater.”

Russia exports about 20 million tonnes of crude per month – about 5 million bpd – through several routes, including the Druzhba pipeline to Europe and pipelines to Asia.

America will start buying oil for SPR: The US could begin repurchasing oil for the Strategic Petroleum Reserve (SPR) after Congress completes mandated sales in June, according to US Energy Secretary Jennifer Granholm. “The congressionally mandated sale of 26 million barrels will be completed by June, and it is at the point where we will flip the switch and then look to buy,” Granholm told lawmakers at a hearing in the US House of Representatives.

The Biden administration last year made the largest ever sales above the SPR of 180 million barrels. That and other sales over the past year have pushed reserve levels up to about 372 million barrels, the lowest since 1983.

The US Federal Reserve may need to raise interest rates again at its next meeting as inflation data so far has not convinced Fed Governor Michelle Bowman that prices are coming down. Following Granholm’s announcement that the US may buy oil for the SPR, oil’s losses have been limited.