Oil steady as traders assess storm impact
OIL steadied with the worst of storm Beryl over in the US for the crude hub in and around Houston, with traders looking ahead to Federal Reserve Chair Jerome Powell’s two-day testimony on monetary policy.
Brent traded below US$86 a barrel after shedding almost 2 percent in the prior two sessions, while West Texas Intermediate was near US$82. As storm Beryl continued its path through the US mainland, recovery efforts were in progress in Texas, with some infrastructure — like the Port of Houston and the Explorer Pipeline — remaining offline. About 85 percent of Houston lost power. Crude remains solidly higher year-to-date, aided by OPEC+ supply cuts that have tightened the market, as well as expectations that the Fed is poised to lower interest rates.
Powell delivered the central bank’s semi-annual report on US monetary policy to the Senate Banking Committee yesterday, offering investors hints on the path forward for borrowing costs.
Forecasts for higher fuel consumption through the northern hemisphere summer have been supportive of prices, although there are growing indications the optimism is fading. Money managers increased bearish bets against US gasoline to the highest in seven years, as inventories swell.
Clues on the state of the market were expected yesterday with the release of the Energy Information Administration’s ShortTerm Energy Outlook.
Beryl’s impact “has been more limited than what was initially expected,” which helped prices unwind, said Yeap Jun Rong, market strategist at IG Asia in Singapore. Investors are also likely to remain cautious in the lead-up to the Fed chair’s testimony, as well as key US inflation data, he said.
Timespreads present a mixed picture. While the gap between Brent’s two nearest contracts remains in a bullish, backwardated structure — when the nearest contract trades at a premium over the following month — levels have come off from last week. It was last 74 US cents a barrel in backwardation compared with 88 US cents at the start of last week.