Oil set for first monthly decline this year before OPEC+ meeting

Oil is heading for the first monthly decline since November as OPEC+ ministers prepare to gather to discuss the group’s supply policy.

West Texas Intermediate futures traded near $110 a barrel after closing almost 2 per cent lower on Wednesday. Escalating fears over an economic slowdown as central banks aggressively raise interest rates to combat surging inflation have dented oil this month. That’s overshadowed rapidly tightening energy markets.

OPEC+ is expected to rubber-stamp a modest increase in supply for August, but the group has struggled to meet its production targets this year. The US has repeatedly called on the group to pump more, and President Joe Biden is set to visit the Middle East next month as he seeks to tame surging fuel prices.

US gasoline demand is showing signs of softening just three weeks into the peak driving season, with near-record prices likely encouraging people to stay closer to home. The four-week moving average of gasoline supplied fell below 9 million barrels a day, or about 600,000 barrels less than typical seasonal levels, according to the Energy Information Administration.

Oil is still up around 45 per cent this year as the global economic recovery coincided with upended trade flows from Russia after the Ukraine crisis. US crude inventories at the key storage hub at Cushing have reached critically low levels as refineries produce as much fuel as possible, while the pull for barrels from overseas remains strong.