Oil Edges Down on US Recession Risk

A oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. REUTERS/Christian Hartmann/File Photo
A oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. REUTERS/Christian Hartmann/File Photo
TT
20

Oil Edges Down on US Recession Risk

A oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. REUTERS/Christian Hartmann/File Photo
A oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. REUTERS/Christian Hartmann/File Photo

Oil prices slipped on Thursday as the prospect of a possible recession in the United States, the world's largest oil consumer, offset concerns of tight supply.

Brent crude fell 55 cents, or 0.63%, to $86.78 a barrel by 1352 GMT. US West Texas Intermediate (WTI) slipped 46 cents, or 0.55%, to $82.80.

Both Brent and WTI had risen 2% on Wednesday to their highest in more than a month as cooling US inflation spurred hopes that the US Federal Reserve will stop raising interest rates.

However, minutes from the Fed's last policy meeting indicated that banking sector stress could tip the economy into recession, which would weaken US oil demand.

The Organization of the Petroleum Exporting Countries (OPEC) flagged downside risks to summer oil demand in a monthly report on Thursday. But OPEC kept its forecast for global oil demand growth in 2023 unchanged.

The market is a keeping a close eye on indicators of economic growth, which Tamas Varga of oil broker PVM described as fragile. "Inflationary pressure could easily become elevated again," Varga said.

The market is still reeling from the shock decision by OPEC and its allies, together known as OPEC+, to cut output further.

The executive director of the International Energy Agency expects the move to tighten supply in the second half of the year and push oil prices higher, Reuters reported.

However, the International Monetary Fund on Tuesday highlighted the risk this poses to global economic expansion.

For every 10% rise in the price of oil, IMF models show a 0.1 percentage point reduction in growth and a 0.3 percentage point increase in inflation, IMF chief economist Pierre-Olivier Gourinchas said.

Markets on Wednesday shrugged off a small build in US crude oil stocks, attributing it in part to a release of oil from the US emergency reserve and lower exports at the start of the month.

The Biden administration plans to refill the US Strategic Petroleum Reserve soon and hopes to do it at lower oil prices, US Energy Secretary Jennifer Granholm said on Wednesday.



Oil Steadies as Market Awaits Fresh US Tariffs

FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
TT
20

Oil Steadies as Market Awaits Fresh US Tariffs

FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo

Oil prices were little changed on Wednesday as traders remained cautious ahead of US tariffs due to be announced at 2000 GMT, fearing they could exacerbate a global trade war and dampen demand for crude.

Brent futures were down 7 cents, or 0.09%, at $74.42 a barrel by 0858 GMT. US West Texas Intermediate crude futures fell 5 cents, or 0.07%, to $71.15.

The White House confirmed on Tuesday that President Donald Trump will impose new tariffs on Wednesday, though it provided no detail on the size and scope of the trade barriers, according to Reuters.

Trump's tariff policies could stoke inflation, slow economic growth and escalate trade disputes.

"Crude prices have paused last month's rally, with Brent finding some resistance above $75, with the focus for now turning from a sanctions-led reduction in supply to Trump's tariff announcement and its potential negative impact on growth and demand," said Ole Hansen, head of commodity strategy at Saxo Bank.

Traders will be watching for levies on crude imports, potentially driving up prices of refined products, he added.

For weeks Trump has touted April 2 as "Liberation Day", bringing new duties that could rattle the global trade system.

The White House announcement is scheduled for 4 p.m. ET (2000 GMT).

"The balance of risk lies to the downside, given that weaker than expected tariff measures are unlikely to drive a significant rally in Brent, while stronger than expected measures could trigger a substantial selloff," BMI analysts said in a note.

Trump has also threatened to impose secondary tariffs on Russian oil and on Monday he ramped up sanctions on Iran as part of his administration's "maximum pressure" campaign to cut its exports.

"Markets likely to be volatile ahead of the final announcements on tariffs and the scale of them. The threat of secondary tariffs on Russian crude continues to provide some support for prices, with more downside risk at present around tariff uncertainty," said Panmure Liberum analyst Ashley Kelty.

US oil and fuel inventories painted a mixed picture of supply and demand in the world's biggest producer and consumer.

US crude oil inventories rose by 6 million barrels in the week ended March 28, according to sources citing the American Petroleum Institute. Gasoline inventories, however, fell by 1.6 million barrels and distillate stocks were down by 11,000 barrels, the sources said.

Official US crude oil inventory data from the Energy Information Administration is due later on Wednesday.