June West Texas Intermediate (WTI) crude oil futures have experienced significant volatility this week, ultimately poised to close higher following a late-week recovery.
This recovery was significantly influenced by positive economic remarks from U.S. Treasury Secretary Janet Yellen, which countered earlier market fears driven by economic data and geopolitical developments.
Economic Weakness and Market Sentiments
Throughout the week, oil markets were beleaguered by concerns over a slowing economy exacerbated by persistently high interest rates. The release of the U.S. GDP data, which showed growth at only 1.6% against the expected 2.4%, furthered these fears by suggesting a more considerable economic slowdown. This report was particularly impactful, fueling bearish sentiment as traders worried about falling demand in a weakening economy. Additionally, a stronger U.S. dollar made dollar-priced oil more expensive for holders of other currencies, dampening demand prospects.
Supply Concerns and Inventory Data
Adding another layer to the market’s complexity this week was the Energy Information Administration (EIA) report, which revealed a surprising drop in U.S. crude inventories. Stocks plummeted by 6.4 million barrels, significantly surpassing the expected increase of 825,000 barrels. This drawdown is a bullish signal, often indicative of higher-than-expected demand or lower supply, and provided some support to oil prices amidst broader economic concerns.