On Wednesday, oil prices staged a modest recovery from their four-month lows, finding support in a U.S. jobs report that hinted at a potential interest rate cut in September. Concurrently, market participants remained cautious as they evaluated plans by OPEC+ to gradually ease production cuts later in the year.
Brent crude futures saw an uptick of 39 cents, or 0.5%, reaching $77.91 a barrel by 1241 GMT, while U.S. West Texas Intermediate (WTI) crude futures also climbed by 39 cents, or 0.5%, to $73.64.
The previous day had seen both Brent and WTI contracts experience declines of over 1%, marking their lowest settlements since early February, with a notable drop of approximately $3 per barrel on Monday. These declines followed OPEC’s announcement of intentions to increase supply from the fourth quarter onwards, despite recent indications of weakening demand growth.
Helima Croft, RBC Capital’s head of commodities research, observed that the current surplus of supply was causing unease among market participants, including those typically less skeptical of OPEC’s strategies.
However, Saudi Arabian energy minister Prince Abdulaziz bin Salman sought to allay concerns by stating that OPEC+ would halt the reduction of cuts or even reverse them if demand failed to sufficiently absorb the additional barrels.
The market sentiment found some support from data showing that U.S. private payrolls expanded less than anticipated in May, with revised lower figures for April as well. This reinforced the previous day’s report of a larger-than-expected decline in U.S. job openings for April, potentially strengthening the case for a Federal Reserve interest rate cut to counter inflation.
Tamas Varga, an analyst at PVM Oil, interpreted the recent U.S. job data as indicative of a softer labor market, potentially laying the groundwork for a Fed rate cut in September.
Additionally, U.S. Energy Secretary Jennifer Granholm hinted at the possibility of accelerating the replenishment of the Strategic Petroleum Reserve, signaling confidence in the adequacy of the global oil market’s supply.
However, sources citing American Petroleum Institute figures revealed that U.S. crude stocks surged by over 4 million barrels in the week ending May 31, contrary to analysts’ expectations of a 2.3 million barrel decline. Gasoline stocks also experienced a significant increase, double the amount anticipated by analysts.
Giovanni Staunovo, an analyst at UBS, emphasized the importance of renewed inventory draws to drive oil prices upwards.
Investors are closely monitoring the official stockpile data to be published by the U.S. Energy Information Administration, particularly for last week, which reflects fuel consumption during the Memorial Day holiday, marking the onset of the U.S. driving season.