Brent on a macro-driven rollercoaster since erasing OPEC+ gains

Brent pared losses as Wall Street reversed course, trading nearly level with where it stood before the shock production cuts announced by OPEC+ in early April.

Crude fluctuated in over a $2 range on Wednesday, mostly ignoring a bullish inventory report from the Energy Information Administration and instead tracking a reversal in equities.  

“This is a strong number,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth, referring to the 5.1 million barrel drop in US crude inventories. “But it is not really being reflected in price action because the market wants to see the China-demand story play out and is still betting the US slows down significantly in the second half.”  

Asian crude market indicators have weakened in recent weeks while oil-refining profits have deteriorated, signaling lackluster fuel demand. Consequently, Brent’s prompt-spread flipped into contango earlier in the session for the first time since late January, excluding contract expiration dates. The weakening spread indicates traders see near-term supply outweighing demand.

Despite the pullback, crude is still up from a 15-month low reached in mid-March following turmoil in the banking sector.