Crude oil prices are poised for a second day of declines on Wednesday, as market sentiment leans towards profit-taking following this month’s surge to levels not witnessed since October.
The news of a significant increase in US stockpiles this month appears to be exerting downward pressure on prices. According to Reuters, market sources, relying on the latest data from the American Petroleum Institute, reported a notable rise of 9.3 million barrels in crude oil inventories.
The upcoming meeting of the Organization of Petroleum Exporting Countries (OPEC) and its allies next week has been closely monitored. Although an extension of existing output cuts exceeding two million barrels per day has already been affirmed, analysts believe that no changes to this policy are likely until the full ministerial meeting scheduled for June. However, investors remain cautious, considering the occasional unpredictability of OPEC’s decisions.
While output reductions from OPEC once held significant sway over the market, their impact has diminished over time. Rapid expansion of supply from non-member countries such as the United States, Canada, Guyana, and Brazil has contributed to filling supply gaps. Additionally, reports indicate that OPEC members are not consistently adhering to production cuts, with recent data suggesting an over-production of 220,000 barrels per day.
Despite ongoing supply concerns, the market continues to grapple with a well-supplied environment amidst uncertain demand. The potential for lower interest rates across industrialized economies is expected to support energy prices, contingent upon inflation moderating as anticipated.
This week, the oil market will be closely watching several key indicators. Final US growth data for the last quarter of the previous year is expected to be released, with forecasts suggesting a downward revision. Additionally, attention will be on oil inventory figures from the Energy Information Administration and the latest snapshot of operational US oil rig numbers from Baker Hughes, both of which are anticipated to provide further insight into market dynamics.