Oil Market Starts July On Slippery Slope: Here Is A Key Factor To Watch Out For

Oil prices traded marginally lower during Monday morning’s Asian trading session as possibilities of a slowdown led by extended rate hikes by the Federal Reserve overshadowed fears of any supply constraints.

What Happened: West Texas Intermediate futures for August delivery were down 0.16% at $70.53 per barrel, while Brent futures for September delivery traded 0.08% lower at $75.34 per barrel.

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Recent data released on Friday supported the case for further rate hikes by the Fed. Although headline PCE inflation continued to slow to 3.4% year-over-year, the core measure remained relatively unchanged at 4.6% year-over-year. Additionally, factory activity growth in China, the world’s largest crude importer, showed signs of slowing down in June, according to a Reuters report.

Supply Crunch Boost? Analysts also anticipate tighter supplies and a potential price boost in the second half of the year. Saudi Arabia pledged to cut an additional 1 million barrels per day of output in July, while the U.S. is replenishing its Strategic Petroleum Reserve, as reported. U.S. crude output declined in April to 12.615 million barrels per day, the lowest level since February, according to the U.S. Energy Information Administration.

Market attention will now turn to a conference hosted by the Organization of the Petroleum Exporting Countries (OPEC) later this week, which is expected to provide insights into future supply levels.

Price Action: On Friday, the United States Brent Oil Fund LP BNO closed 1.15% higher, while the Vanguard Energy Index Fund ETF VDE gained 0.68%.

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