Global oil prices remained largely unchanged in the early hours of Wednesday as markets weighed a possible build in U.S. crude stockpiles and economic concerns against planned supply cuts by the world’s biggest oil exporters and hopes for higher global demand.
Brent oil, against which Nigerian oil is priced, fell 6 cents to $79.34 a barrel while the U.S. West Texas Intermediate (WTI) crude slipped 6 cents to $74.77 a barrel.
“Fundamentally, we should reach a supply deficit situation in the third quarter, but whether that is trumped by recession concerns and cautious sentiment around rate hikes remains to be seen,” said DBS Bank’s lead energy analyst Suvro Sarkar.
Investors were awaiting U.S. inflation data on Wednesday for clues on the interest rate outlook in the world’s biggest economy. Higher rates can slow economic growth and reduce oil demand.
For now, markets are pricing in a 92% chance of a 25-basis-point hike later this month, the CME FedWatch tool showed.
In a bearish demand sign, U.S. crude inventories rose about 3 million barrels in the week to July 7, market sources said, citing American Petroleum Institute industry figures. Analysts polled by Reuters expected a 500,000-barrel rise in crude stocks.
If confirmed in data due from the Energy Information Administration (EIA) later on Wednesday, that would be the first crude stock build in four weeks and compares with an increase of 3.3 million barrels in the same week last year and a five-year average decline of 6.9 million barrels.
Nevertheless, forecasts from the U.S. EIA and the International Energy Agency point to the market tightening into 2024. The EIA projected global demand would outpace supply by around 100,000 bpd in 2023 and by 200,000 bpd in 2024.
Separately, the International Energy Agency (IEA) said the oil market should stay tight in the second half of 2023, citing strong demand from China and developing countries combined with recently announced supply cuts, by top exporters Saudi Arabia and Russia, among others.
Top producer Saudi Arabia pledged last week to extend a production cut of 1 million bpd in August, while Russia will cut exports by 500,000 bpd.
“The short-term crude demand outlook shouldn’t be that bad, as everyone is taking a vacation that requires some travel this summer,” said OANDA senior analyst Edward Moya.