Oil prices dip on risk-off sentiment

June 14, 2024 (MLN): Oil prices fell on Friday, trimming some of their weekly gains, due to a risk-off sentiment in broader financial markets and further indications of strong global supply.

Brent crude traded near $82.41 per barrel, down by 0.41% on the day. It is up 3.65% this week.

While West Texas Intermediate crude (WTI) was at $78.16 per barrel, down by 0.59% on the day.

Stocks in the region fell, putting downward pressure on risk assets such as oil, as Bloomberg reported.

While there have been signs of cooling US inflation, Federal Reserve officials this week penciled in only one interest-rate cut this year.

“Market participants are reassessing if they have got ahead of themselves as weaker-than-expected US economic conditions were presented overnight amid the recent ‘hawkish hold’ from the Fed,” said Yeap Jun Rong, market strategist for IG Asia Pte in Singapore.

Oil has declined since early April, in part due to concerns over demand, although attacks on ships by the Yemen-based Houthi militants have started to ramp up again, jeopardizing trade flows.

More supply from the US, as well as an ongoing slowdown in Chinese refining activity, are further clouding the outlook.

Still, timespreads are holding in a bullish, backwardated structure, where later-dated contracts trade at a discount to nearer ones, indicating tight supplies.

The gap between Brent’s two nearest contracts was at 40 cents a barrel in backwardation, compared with 28 cents a week ago.

The International Energy Agency this week flagged a major surplus this decade as the shift away from fossil fuels accelerates, a call that drew a rebuke from the Organization of the Petroleum Exporting Countries.

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