London, Aug. 23, 2023 – Oil prices dropped on Wednesday as traders were cautious ahead of potentially gloomy manufacturing data and an annual meeting at Jackson Hole where heavy-hitter central bankers including from the United States will talk interest rates.
Brent crude was down 51 cents to $83.52 a barrel at 0738 GMT, while U.S. West Texas Intermediate crude was at $79.15 a barrel, down 49 cents.
Markets await hints on the outlook for interest rates when Federal Reserve officials and policy makers from the European Central Bank, the Bank of England and the Bank of Japan head to Jackson Hole, Wyoming, for an annual meeting later this week.
“Investors are reluctant to take big positions ahead of the Jackson Hole symposium as they want to find clues for the next step by the U.S. Federal Reserve,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
Earlier on Wednesday, Japan posted shrinking factory activity for a third straight month in August, and the euro zone, France, Germany, Britain and the United States are set to release their own purchasing managers’ index (PMI) data later in the day.
“What oil watchers should be concerned with is that all of the predictions of their manufacturing PMIs are under 50, therefore they are all in contraction territory and readings below expectations will sound warnings again of lower oil demand,” said John Evans of oil broker PVM.
Crucial to shoring up oil demand over the rest of the year is China, the world’s second-largest economy. But weak growth has frustrated markets as pledged stimulus has fallen short of expectations, including a smaller-than-expected cut in a key lending benchmark on Monday.
On the supply side, members of the Organization of the Petroleum Exporting Countries and its allies have opted to curb supplies to buoy prices, with Saudi Arabia cutting output by another 1 million barrels per day (bpd) from July through September. Russia plans to reduce exports in August by 500,000 bpd.
Crude stocks in the United States continued to fall, dropping by about 2.4 million barrels in the week ended Aug. 18, according to market sources citing American Petroleum Institute figures on Tuesday. That was a slightly smaller draw than a drop of 2.9 million barrels analysts expected in a Reuters poll.
The weekly report from the Energy Information Administration, the statistical arm of the U.S. energy department, is due at 1430 GMT on Wednesday. (Reuters)
