Oil futures experienced a small decline on Thursday morning following the downgrade of the U.S. credit rating. This decrease offset the positive effect of a significant drop in U.S. crude inventories.
Price Action
- West Texas Intermediate (WTI) crude for September delivery decreased by 0.3% to $79.26 a barrel on the New York Mercantile Exchange.
- October Brent crude, the global benchmark, fell by 0.3% to $82.92 a barrel on ICE Futures Europe.
Market Drivers
On Wednesday, both Brent and WTI saw a drop of over 2%, marking the biggest one-day percentage decrease since June 27. Despite this, there was record data indicating a 17 million barrel decline in U.S. crude inventories during the previous week.
Analysts attributed this sharp drop to negative sentiment following Fitch’s recent downgrade of the U.S. credit rating, as well as a strengthening U.S. dollar. These factors led to a sell-off in crude prices, even though they had previously reached three-month highs due to indications of tightening global supplies and positive expectations for future demand.
Stephen Innes, managing partner at SPI Asset Management, commented, “The timing for the downgrade was unfortunate, as traders were on vacation and away from their desks. Thin markets are susceptible to knee-jerk reactions to news.”
Investors are now keeping an eye on Friday’s meeting of the OPEC+ panel, which is not expected to recommend any changes to the output policies of the group. This group includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies, such as Russia.
Analysts are also anticipating an announcement from Saudi Arabia about extending its voluntary production cut of 1 million barrels a day through September. This cut has been in effect since July.
Additionally, the Energy Information Administration is expected to release a report on Thursday regarding an 18-billion cubic feet injection to U.S. natural gas storage for the week ending July 28, according to analysts surveyed by S&P Global Commodity Insight.