Oil Plunges Below $69 as Pledged OPEC+ Cuts Fail to Dent Supply

Oil fell for a third day, dropping below $69 a barrel in New York, as the prospect of a US recession threatened to curb fuel demand.

(Bloomberg) — Oil fell for a third day, dropping below $69 a barrel in New York, as the prospect of a US recession threatened to curb fuel demand.

Just days after some OPEC+ members had pledged to begin cutting output, there were indications that supply remains ample, while demand has been disappointing. Renewed anxiety over the financial stability of regional US lenders also contributed to sending oil futures to the lowest since March. Looking ahead, markets will be watching the Federal Reserve, which is projected to boost rates 25 basis points and signal a pause in its aggressive tightening campaign.

Crude is down about 14% from the beginning of this year, despite China’s emergence from its restrictive Covid Zero policy and sizable reductions in supply by the Organization of Petroleum Exporting Countries and its allies. Those surprise cutbacks, announced just a month ago, were supposed to seize back control of the market from bearish speculators. Instead, a brief rally in April has fizzled as global slowdown fears come back to the forefront.

US Stockpiles

In the US, nationwide crude inventories fell by 1.28 million barrels, the government said Wednesday. That’s less than the 4 million barrel drop an industry group reported on Tuesday.

In Russia, meanwhile, there was no sign of a sustained drop in crude flows out of the country, despite its pledge to cut production by 500,000 barrels a day. Exports jumped back above 4 million barrels a day in the week to April 28, a level surpassed only once since the country’s troops invaded Ukraine in February 2022, according to tanker-tracking data compiled by Bloomberg.

There will be some concern in the market, however, that Iran’s seizure of a second oil tanker in a week may disrupt shipping in one of the world’s most important trade routes. Pipeline shipments from Iraq’s north and its Kurdish region to the Turkish port of Ceyhan remain idled due to a dispute between the two nations.

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