July 7, 2023 [Yahoo!]- Oil settled a penny higher after a choppy session in which mixed signals, including a price hike for Saudi crudes and broader risk-off sentiment, pulled traders in opposite directions.
audi Arabia lifted official selling prices for its flagship Arab Light crude to all regions Thursday, a signal it is confident in market demand. The decision has caused prompt time-spreads to tighten on expectations that buyers will turn to the Atlantic Basin and tighten Brent and US crude markets.
“I think Saudi Arabia realizes that there is a mismatch between the different grades of crude due to the production cuts and is trying to recalibrate regional grades by raising its OSP and forcing buyers to other regions,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “This is really threading the needle and shows just how hard it is balance markets in current environment.”
However, broader risk-off sentiment exerted pressure on prices after strong US jobs data strengthened expectations that the Federal Reserve would continue its policy of rate hikes to cool down the economy. West Texas Intermediate traded in a $2 range, largely following broader equity markets.
Crude remains about 10% lower this year, with China’s lackluster economic recovery and higher US and European interest rates weighing on the outlook for demand. The surge in borrowing costs is leading to lower global oil inventories, possibly setting prices up for spikes further down the line.
US inventories fell 1.5 million barrels last week, according to government data. While the decline was less than anticipated, strength in gasoline demand after the US holiday and draws across refined products helped buoy prices.
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