- Crude oil price has been within a horizontal channel for three consecutive trading sessions.
- Supply concerns linger on after OPEC+ failed to meet its March output target.
- IMF holds a similar opinion as OPEC and IEA regarding slowed global economic growth.
Crude oil price has edged higher in early Thursday trade even as it remains within a horizontal channel. As at , WTI futures, the time of writing, the benchmark for US oil, was at $103.36; up by 0.93%. At the same time, Brent futures were up by 0.76% at $108.07. The range between $106.21 and $109.31 has been a crucial one for Brent oil over the past three trading sessions, although it momentarily dropped past the channel’s lower border on Tuesday.
Demand outlook
As has been the case in recent weeks, the forces of demand and supply have continued to influence crude oil price. On the one hand, heightened inflation is expected to slow global economic growth.
IMF joined IEA and OPEC in lowering its global growth forecast. In the past week, OPEC adjusted its outlook for global oil consumption downwards to 100.5 million bpd. The adjustment represented a decline of 410,000 barrels from its prediction prior to the Russia-Ukraine war. Similarly, IEA cut its forecast for global oil consumption in the current year by 260,000 bpd.
On Tuesday, IMF cuts its global economic growth forecast by close to a percentage point. It has warned that the ongoing Russia-Ukraine war will further heighten inflationary pressures.
In addition to the bearish outlook on the growth of the global economy, investors are also keen on the current wave of COVID-19 in China -a key consumer of global oil. Indeed, the recent lockdowns imposed on the country’s commercial hub, Shanghai, have weighed on crude oil price by heightening demand concerns.
However, there is hope that the tide is turning as some factories reopen. Besides, in two districts outside the quarantined regions, there were no new infections reported on Wednesday.
Supply concerns
The weekly stockpiles report released by the US Energy Information Administration (EIA) showed that crude oil inventories dropped by 8.020 million barrels for the week ending on 15th April. The recorded draw is the largest since September 2020; an aspect that led to a rebound in crude oil price. Analysts had predicted a build of 2.471 million; a lower increase compared to the prior week’s 9.382 million barrels. Distillate stocks also dropped by 2.664 million barrels while gasoline inventories were down by 761,000 barrels.
Furthermore, OPEC+ failed to meet its March output target by producing 1.45 million bpd. This comes after Russia’s output began to fall following the sanctions imposed on the country by the West. Besides, the blockades on Libya’s crucial exports terminals and oilfields have further heightened supply concerns; and boosted crude oil price.