May 23, 2024

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Oil prices drop to around $90 a barrel in volatile trade

Oil prices drop to around $90 a barrel in volatile trade

LONDON (Reuters) – Oil prices fell in volatile trading on Tuesday, amid fears of an increase in US supply amid an economic slowdown and lower Chinese demand for fuel.

Brent crude futures fell $1.35, or 1.47 percent, to $90.27 a barrel by 1406 GMT.

US West Texas Intermediate crude futures fell $1.77, or 2.07%, to $83.69, after rising more than $1 earlier in the session.

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Expectations for fuel demand in China weighed on sentiment after the world’s largest importer of crude oil delayed the release of economic indicators that were due to be published on Tuesday. No date has been set for the rescheduled release. Read more

CMC Markets analyst Tina Teng said China’s commitment to its COVID-free policy continued to raise doubts about the country’s economic growth.

Also in focus was the Bank of England’s plan to start selling the huge government bond holdings it had amassed during the coronavirus crisis. This resulted in higher long-term returns, indicating increased risks to financial stability.

On the supply side, market talk about the announcement of the release of US oil reserves weighed on sentiment, said Giovanni Stonovo, an analyst at UBS.

Sources told Reuters on Monday that the Biden administration plans to sell oil from the Strategic Petroleum Reserve in a bid to cool fuel prices ahead of next month’s congressional elections.

In addition, a preliminary Reuters poll on Monday showed that US crude oil inventories are expected to rise for the second week in a row.

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The Energy Information Administration said production in the Permian Basin of Texas and New Mexico, the largest US shale oil basin, is expected to rise by about 50,000 barrels per day to a record 5.453 million barrels per day this month.

ANZ Research analysts said in a note that price support came in early trading from investors who increased their long positions in futures after cutting two million barrels per day to production targets agreed by OPEC+.

Several members of the oil production group supported the cut after the White House accused Saudi Arabia of forcing some countries to support the move, a charge Riyadh denies.

“Although the production cut is not actually likely to be even half that high, the US government considers it an insult… The question now is how the US will react, as this could have a far-reaching impact on the oil market.” Commerzbank said in a note.

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(Additional reporting by Rowena Edwards in London) Additional reporting by Isabel Qua in Singapore; Editing by David Goodman and Ed Osmond

Our criteria: Thomson Reuters Trust Principles.