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Crude oil futures fell on Tuesday for a second straight session, as ceasefire talks between Israel and Hamas ease fears of a wider conflict, and U.S. government data pointed to rising domestic production.
Hopes for a ceasefire agreement have grown in recent days following a renewed push led by Egypt to revive stalled negotiations between Israel and Hamas, and in the meantime, global supply remains uninterrupted.
The U.S. Energy Information Administration reported domestic crude production climbed to 13.15M bbl/day in February from 12.58M bbl/day in January for its biggest monthly increase since October 2021.
Investors also were wary of this week’s Federal Reserve policy meeting, as a potentially strong hawkish stance that pushes expectations of a first rate cut to Q4 or even to next year could trigger a further rise in the dollar while also threatening the outlook for oil demand.
Front-month Nymex crude (CL1:COM) for June delivery closed -0.8% to $81.93/bbl, its lowest settlement value since March 27, while front-month June Brent crude (CO1:COM) ended -0.6% to $87.86/bbl; for the month, WTI declined 1.5% while Brent gained 0.4%.
WTI tested its 50-day moving average of $81.82/bbl, a level that has provided technical support for prices, and a significant drop below it could accelerate selling.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
The Goldman Sachs commodities team says Brent prices may dip to $84/bbl by December as lower valuation outweighs likely inventory declines in Q3.
On the bullish side of Goldman’s analysis, U.S. Lower 48 crude production and Canadian output are both running ~100K bbl/day below expectations, and Russian production is coming in ~300K bbl/day below last year.
On the bearish side, Goldman sees Chinese demand at a flat 16.2M bbl/day with plenty of upcoming maintenance downtime for state-owned refineries, and estimates global oil commercial stocks have increased by 900K bbl/day in the last 90 days.
