Futures Market Trends
Oil futures took a tumble on Thursday, facing a mixed bag of bullish and bearish news. The Energy Information Administration’s report revealed a more significant-than-anticipated 4.2 million barrel decline in U.S. crude inventories, yet this was overshadowed by unexpected increases in gasoline and diesel stocks. As the summer driving season kicked off, concerns about fuel demand began to simmer.
The decline in gasoline demand to 9.1 million barrels per day from the previous week’s 9.3 million surprised many, prompting speculations about the future of the market. John Kilduff of Again Capital shared his insights with Reuters, expressing his expectation of a draw in gasoline leading up to the holiday weekend. However, an overabundance of product inventories resulted from high refinery output, causing gasoline stocks to balloon.
Market Analysis
Analysts at StoneX observed that weakness in the gasoline sector had a cascading effect, dragging down the broader oil market. With looming concerns about rising interest rates and a potential economic slowdown, the summer demand outlook appeared uncertain.
Market repercussions were swift, with front-month June Nymex RBOB gasoline futures plummeting by 2.4% to a three-month low of $2.4046 per gallon. Ultra-low sulfur diesel futures mirrored the trend by hitting their lowest point in nearly a year. Moreover, front-month Nymex crude for July delivery sustained its sixth drop in eight sessions, closing 1.7% lower at $77.91 per barrel, while July Brent ended the day down 2.1% at $81.86 per barrel.
OPEC+ Deliberations
As the industry grappled with market fluctuations, all eyes turned to the upcoming OPEC+ meeting. Speculation intensified as reports surfaced that OPEC+ was mulling over extending certain production cuts into 2025. The current accord includes total output reductions of 5.8 million barrels per day, encompassing 3.66 million barrels per day from OPEC+ members valid until year-end, and 2.2 million barrels per day in voluntary cuts by select members set to expire in June.
The proposed extension could involve stretching some or all of the 3.66 million barrels per day cuts into 2025 and retaining some or all of the 2.2 million barrels per day voluntary cuts until the third or fourth quarter of 2024. Should this plan materialize, it could herald significant shifts in the oil production landscape, potentially influencing market dynamics in the years to come.