U.S. West Texas Intermediate crude oil futures and international-benchmark Brent crude oil futures are edging higher on relatively low volume early Thursday. The price action suggests traders are taking a break from a volatile week which featured supply losses from Libya and a fear of lower demand after the International Monetary Fund (IMF) cut its global growth forecasts.
Crude Oil Supported by Unexpected Drop in US Inventories
Helping to provide some support overnight is an unexpected drop in U.S. crude stockpiles. At 05:14 GMT, June WTI crude oil futures are trading $103.21, up $1.02 or +1.00%. June Brent crude oil is at $107.79, up $0.99 or +0.93%. On Wednesday, the United States Oil Fund ETF (USO) settled at $77.25, up $0.39 or +0.51%.
Libya is currently losing more than 550,000 barrels per day in oil production from blockades on major fields and export terminals, the National Oil Corporation media office said on Wednesday. The blockades by groups in southern and eastern Libya citing political demands have caused NOC to declare force majeure on output from several major fields and ports in recent days.
The first field went offline on Sunday with others following on Monday and Tuesday, Reuters reported. The International Monetary Fund on Tuesday slashed its forecast for global economic growth by nearly a full percentage point, citing Russia’s war in Ukraine, and warning that inflation was now a “clear and present danger” for many countries, Reuters reported.
The war is expected to further increase inflation, the IMF said in its latest World Economic Outlook, warning that a further lightening of Western sanctions on Russia to target energy exports would cause another major drop in global output. Downgrading its forecasts for the second time this year, the global crisis lender said it now projects global growth of 3.6% in both 2022 and 2023, a drop of 0.8 and 0.2 percentage point, respectively from its January forecast due to the war’s direct impacts on Russia and Ukraine and global spillovers.
While the IMF news has been the primary driver of the price action this week, crude oil did get a little support on Wednesday from a surprise drop in U.S. crude stockpiles as reported by the U.S. Energy Information Administration (EIA). U.S. crude stockpiles fell sharply last week due to a surge in exports to a more than two-year high. Meanwhile production neared pre-pandemic levels, the EIA said on Wednesday.
Crude inventories fell by 8 million barrels in the week ended April 15 to 413.7 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.5 million-barrel rise. That was driven by a surge in exports, which rose to 4.3 million barrels per day in the most recent week, the most since March 2020, while imports fell to their lowest since April 2021.
This is a reflection of worldwide demand for crude as Russian exports have fallen since its invasion of Ukraine in February. Those exports offset an injection of 4.7 million barrels from U.S. strategic reserves as part of the White House’s efforts to lower fuel prices overall.
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