Brent Oil Price Heading For Strongest Weekly Fall

During the week, the barrel fell in price by more than 5%.

Oil prices could end the week with their biggest decline in the last three months, Reuters calculated. The decrease in Brent oil prices by 16:35 Minsk time on May 3 amounted to 5.5%, to $83.33 per barrel. WTI oil has fallen in price by 6.4% since the beginning of the week, to $78.48 per barrel.

The decline in the oil market came amid uncertainty over fuel demand, high interest rates and signs of easing geopolitical risks. Investors are concerned that high interest rates will curb economic growth in the long term in the United States, the world's largest oil consumer, as well as in other parts of the world, the newspaper writes. The market was held back from a more significant decline by the prospect that OPEC+ countries would continue to limit production.

The US Federal Reserve this week kept interest rates unchanged and noted high inflation indicators that could delay the start of a rate cut cycle. The US Federal Reserve rate has not changed since the summer of 2023, remaining at its highest in more than 20 years. Higher rates typically put pressure on the economy and can reduce demand for oil.

“We view the sell-off in commodities over the past two days as a consequence of the Fed's revised rate outlook,” JP Morgan analysts said. In their opinion, the decline in prices on the oil market is not of a fundamental nature.

Pressure on prices was also exerted by negative market data on reserves from the US Energy Information Administration (EIA), ING noted. Total oil inventories rose by 7.3 million barrels over the week to nearly 461 million barrels, the highest level since June last year. Analysts polled by Reuters had expected a decline of 1.1 million barrels.

In addition, the risk premium in the oil market continues to decline as geopolitical tensions in the Middle East ease, ING said. However, this factor may return to the market, so it should not be completely discounted, bank analysts warned.

ING analysts believe that $80 per barrel is the lower limit for reducing prices. Trading below that level for an extended period would likely encourage OPEC+ to extend additional voluntary cuts into the second half of the year, experts warned. The next meeting of OPEC+ oil producers is scheduled for June 1.

In addition, fundamentally the market is still in deficit. According to ING, in the second quarter the shortage of raw materials will be about 1 million barrels per day.