Oil prices extend losses amid global economic concerns

June 07, 2023 (MLN): Oil prices fell on Tuesday, expanding losses amid concerns over the global economic backdrop, erasing the price gains associated with Saudi Arabia’s decision to slash oil output by another 1 million barrels per day (bpd) from July.

Brent crude is currently trading at $75.63 per barrel, down by 0.28 % % on the day.

While West Texas Intermediate crude (WTI) is trading at $71.27 per barrel, down by 0.23 % on the day.

On Tuesday, Brent crude and WTI marked a decline of 0.68% and 0.65% respectively.

Priyanka Sachdeva, an analyst at Phillip Nova, said, "The fears of recession, as more and more somber economic readings point towards a slowdown, have kept a lid on oil prices, eroding all OPEC+'s efforts to keep prices afloat," as reported by Reuters.

Market sources stated on Tuesday, citing American Petroleum Institute figures, that U.S. gasoline inventories rose by about 2.4 million barrels and distillates inventories were up by about 4.5m barrels in the week ended 2 June.

The unexpected buildup of fuel stockpiles has raised concerns over consumption by the world’s top oil users.

Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities said, "The market has digested the news of Saudi's production cut and investors are now reluctant to take a large position because of mixed economic forecasts and indicators in the United States and China,"

Market participants are now waiting to see if the U.S. Federal Reserve will hike or hold interest rates in June, and what China's May trade data on Wednesday will indicate about demand in the world's second-largest oil consumer.

China’s official data showed the economy has slowed down, exports shrank much faster than expected in May and imports fell.

Furthermore, Manufactures faced limited overseas demand and weak local consumption.

The data also showed that crude oil imports into China, in May rose to their third-highest monthly level ever as refiners built up inventories, as Reuters added.

Analysts were speculating that Saudi Arabia’s output cut would support oil prices, however, the increase in prices of the commodity seems to be temporary.

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