Oil sank for a second day on Wednesday as worries about the state of the world economy grew, wiping out price gains made when Saudi Arabia, the world’s largest supplier of crude, made a surprise commitment to further decrease output over the weekend.

At 07:05 GMT, the price of Brent crude futures was down 56 cents, or 0.7%, to $75.73 a barrel. West Texas Intermediate crude futures for the United States decreased by 52 cents or 0.7% to $71.22 a barrel.

After Saudi Arabia decided over the weekend to cut output by 1 million barrels per day (bpd) to 9 million bpd in July, both benchmarks increased by more than $1 on Monday.

“The fears of recession, as more and more sombre economic readings point towards a slowdown, have kept a lid on oil prices, eroding all OPEC+’s efforts to keep prices afloat,” Priyanka Sachdeva, an analyst at Phillip Nova, said in a note.

The American Petroleum Institute said on Tuesday that U.S. petrol inventories increased by around 2.4 million barrels and distillates inventories increased by roughly 4.5 million barrels in the week ending June 2.

Concerns over the world’s largest oil consumer’s use were raised by the unanticipated increase in fuel supplies, particularly when travel demand increased over the Memorial Day weekend.

According to the U.S. Energy Information Administration (EIA), this year’s U.S. crude oil production will climb more quickly than anticipated, but demand growth will slow down.

“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,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

According to official data released by China on Wednesday, its imports decreased in May but at a slower rate than exports did as manufacturers battled to find international markets for their products and domestic demand remained weak.

The statistics also revealed that as refiners increased their stockpiles, crude oil imports into China, the largest oil consumer in the world, increased in May to their third-highest monthly level ever.

According to a JP Morgan note, the nation’s forward crude cover has grown, which suggests refineries have not raised their processing rates but are instead hoarding oil.

Although it was unlikely to support a sustained price climb into the high $80s to low $90s per barrel area, several experts anticipated Saudi Arabia’s voluntary decrease, the largest in the kingdom in years, would put a floor under oil prices.

“We expect oil prices to test upside as we enter the summer driving season in the United States,” Kikukawa said, adding that tighter global supply and U.S. plans to buy crude to refill the Strategic Petroleum Reserve would limit the downside.

(Adapted from ThePrint.in)

Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability