Oil Prices Decline from Two-Month Highs but Remain Poised for Weekly Gains

Oil prices experienced a decline from two-month highs on Thursday as traders took profits following a strong rally earlier in the week. Additionally, disappointing U.S. economic data raised concerns about long-term demand.

As of 04:50 ET (08:50 GMT), oil prices fell 0.6% to $86.80 per barrel, while another benchmark dropped 0.7% to $83.30 per barrel. This downturn followed the release of weak labor market indicators and a purchasing managers index (PMI) that suggested a slowdown in the U.S. economy, the largest energy consumer globally. PMI figures from China, another major oil importer, also fell short of expectations on Wednesday.

Despite this decline, both oil benchmarks are still on track for their fourth consecutive weekly increase, largely driven by a much larger-than-anticipated drawdown in U.S. oil inventories. Official data released on Wednesday indicated that U.S. oil stockpiles decreased by over 12 million barrels in the week ending June 28, significantly exceeding forecasts for a draw of just 0.4 million barrels.

The drawdown in both crude and gasoline stockpiles further illustrated that demand is picking up as summer approaches. A record number of Americans are expected to travel by road this week due to the Independence Day holiday, bolstering optimism about heightened demand during this busy travel period.

Ongoing geopolitical tensions in the Middle East have also contributed a risk premium to oil prices, particularly with rising tensions between Israel and Lebanon’s Hezbollah. Additionally, potential production disruptions in the Gulf of Mexico have influenced prices, as Hurricane Beryl made landfall in Jamaica and was expected to impact areas along the eastern coast.

Reports indicate that the hurricane is disrupting U.S. oil production, leading companies like Shell, BP, and Exxon Mobil to evacuate some of their offshore platforms in the Gulf of Mexico. According to data from the National Hurricane Center and the Bureau of Ocean Energy Management, around 73,000 barrels per day of federal offshore oil production may be in the storm’s projected path.

This evolving situation continues to keep a close watch on the oil market dynamics.