Crude Oil Prices Recover From Sharp Losses, Supply Concerns Persist

After heavy losses late in the European session on Wednesday, oil prices recovered some ground on Thursday as risk appetite stabilised, although supply concerns continued to limit buying interest.

The EIA inventories data recorded a draw in inventories of 1.0 million barrels for the latest week which was slightly lower than consensus forecasts of a 1.2 million decline.

There was a build in gasoline inventories which dampened confidence amid concerns that refinery runs could come under renewed pressure. US crude production continued to increase with a gain of close to 10% from levels seen in mid-2016, although the rate of increase was slower than the previous few weeks.

Oil prices were resilient in an immediate reaction to the data before dipping lower. Selling pressure intensified late in the European session with prices falling sharply. A more defensive tone surrounding commodity prices was a significant influence in undermining energy prices as long positions were liquidated.

Overall, WTI retreated sharply to lows near $50.10 p/b while Brent retreated to near $53.00.

The latest Chinese data recorded increased gasoline exports with a 2.5% annual gain for March to the highest level since April 2014. The increase in exports increased concerns over excess global supply and could also undermine potential crude demand over the next few months, especially if China is forced to curb output.

Oil prices did, however, gain some net support from a stabilisation in risk conditions with WTI edging above the $51.00 level in early Europe.

There was also some vague optimism that OPEC would extend production cuts following rhetoric by Kuwait and Saudi Arabian officials, although sentiment remained cautious.

Overall, June WTI futures advanced to near $51.30 p/b at the US open with June Brent futures close to $53.40.

Wider trends in risk appetite will continue to have a significant impact on prices in the short term with OPEC commentary also monitored closely.

WTI Oil Price 4-Hour Chart

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.