(Bloomberg) — Oil fell to its lowest level since mid-March, with a slightly bearish report on U.S. inventories and tensions in the Middle East.
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Brent fell below $83 a barrel on Tuesday, after falling to its lowest level since March 13, while West Texas Intermediate fell as low as $78. Crude inventories at the Cushing, Oklahoma, hub increased by more than 1 million barrels last week, the American Petroleum Institute estimated, according to people familiar with the figures. The breakdown also showed higher national reserves of gasoline and distillates. Official data will arrive later on Wednesday.
In the Middle East, the Israeli army entered the town of Rafah in the Gaza Strip as a truce between the Jewish state and Hamas remains uncertain.
Oil has been on a downward trend since early April, posting losses in three of the last four weeks, with indicators from time frames to processing margins pointing to a bleaker outlook. Brent and WTI fast spreads narrowed to multi-month lows, suggesting conditions are becoming less tight. Additionally, profit margins from manufacturing fuels like diesel have also declined.
While there is weakness related to rising inventories and easing geopolitical threats, there is “support from lingering supply-side risks,” said Han Zhong Liang, a global strategist. investment at Standard Chartered Plc, citing factors including the looming OPEC+ meeting in June and renewed restrictions on Iranian and US exports. Venezuelan oil. “We believe markets are underpricing these near-term risks.”
The Organization of the Petroleum Exporting Countries is due to meet next month to assess supply policy after implementing production cuts in the first half in a bid to support prices. Most traders expect the restrictions to be extended, perhaps until the end of the year, according to a Bloomberg survey.
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