Home News Commodities Oil prices edged lower on Wednesday, reversing earlier gains

Oil prices edged lower on Wednesday, reversing earlier gains

Oil prices

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Oil prices edged lower on Wednesday, reversing earlier gains, as further disruptions to Venezuela’s crude exports were offset by growing fears of a slowdown of the global economy, which will reflect the fuel demand.

Brent crude futures are down 0.10 USD to 67.87 USD per barrel, while the WTI crude futures were down by 0.36 USD to 59.58 USD per barrel.

Oil futures

It seems that oil markets had achieved a balance and a new impetus is needed to determine the direction of price movements. However, it is unlikely to see such an increase until the end of the Sino-American trade talks. The negotiations between the two largest economies in the world will be resumed on Thursday in an attempt to put an end to the eight-month trade war.

Yesterday’s appreciation of the crude oil was largely due to the unsuccessful attempt to resume the operations of Venezuela’s largest oil export terminal after a massive blackout on Monday. Venezuela’s main oil export port of Jose and its four crude upgraders were unable to resume operations following a massive power blackout on Monday, the second in a month. Thus, the WTI reported a 1.9 USD rise in price, while Brent edged up by 0.76 USD.

Oil prices have risen by more than 25% since the beginning of the year, backed by OPEC oil supply cuts, as well as US sanctions on exports from Venezuela and Iran.

Concerns about demand, however, limit the upward movement in oil prices as industry data from Asia, Europe, and the United States show a slowdown in the economy. Moreover, the recent inversion of the US bonds’ yield curve hinted for a recession in the near future.

The US Coast Guard reopened portions of the Houston Shipping Channel with restrictions on waterways affected by a petrochemical leak and fire outside Houston that have disrupted ship traffic. The disruptions to transport and refining operations will weigh heavily on the US inventories.

Also, crude flows from two key shale basins to the Cushing, Oklahoma delivery point for US crude futures slowed in March due to winter production outages.

US crude oil inventories

The American Petroleum Institute reported late Tuesday that US crude supplies climbed by 1.9 million barrels for the week ended March 22, compared to the depletion of 2.13 million barrels registered earlier.

The API also reportedly showed stockpile declines of 3.5 million barrels for gasoline and 4.3 million barrels for distillates

Inventory data from the Energy Information Administration will be released Wednesday. The EIA data are expected to show crude supplies fell by 2.2 million barrels last week, according to a survey of analysts conducted by S&P Global Platts. It also shows expectations for inventory declines of 3.6 million barrels for gasoline and 800,000 barrels for distillates.

Crude oil price analysis

In the short term, prices were pressured by a report from the American Petroleum Institute. The Energy Information Administration will release official weekly figures later on Wednesday, which might seriously differ from the API data.

Brent crude oil is traded in a relatively narrow range of 64 USD to 69 USD per barrel throughout March, reflecting the tension between tightening supplies and concerns over global demand.

The bears are seen extending control in the European session, now pushing WTI (oil futures on NYMEX) to fresh session lows near 59.60 USD levels amid souring risk appetite, as reflected by the drop in the Treasury yields and European equities.

Hedge funds and other money managers have increased bets that demand for oil will be sustained, even as the market rallied last week.