Oil prices decline despite supply dip

Crude Oil prices have fallen back despite a sharp decline in US crude oil supplies, with West Texas Intermediate crude oil trading at $77.51 per barrel.

Investor concerns are growing that a reported extension in OPEC cuts will be enough to prop up barrel bids. OPEC and its extended network of non-member ally states, OPEC+, is broadly expected to extend current voluntary production cuts.

The American Petroleum Institute (API) and Energy Information Administration (EIA) reported sharp declines in US crude oil stocks this week, but energy traders are concerned about a huge runup in refined products as refinery runs outproduce demand.

The EIA reported that refinery-held crude oil rose 601,000 per day, notching in the highest level of held refinery crude since December 2019. Holdings of refined crude oil products, including gasoline and Natural Gas storage holdings, both rose over the week through May 24, hobbling investment sentiment of Crude Oil markets.

The upcoming production meeting by OPEC+ is unlikely to resolve energy markets’ concerns. According to three unnamed sources, OPEC+ is considering extending some Crude Oil output cuts into 2025, on top of an extension of current voluntary production cuts into Q3 or Q4 of 2024.

Crude Oil bids will be looking for more drastic action from the global oil cartel to crimp a possible overhang in production against global demand.