The Elk Hills Oil Field in California was the site of a stunning display of oil wells at sunset on April 14, 2024. As gas prices continued to rise, the view highlighted the impact of changing economic conditions on the oil industry.
The disappointing U.S. economic growth in the first quarter, which came in at 1.6% compared to the expected 2.4%, led to a decline in crude oil futures. Slower economic growth can have a negative effect on crude oil demand and pricing.
On Wednesday, both the West Texas Intermediate June contract and the Brent June contract closed lower, with WTI down 0.43% and Brent down 0.45%. Meanwhile, RBOB Gasoline May contract was priced at $2.72 a gallon, down 0.36%, while Natural Gas May contract was $1.62 per 1,000 cubic feet, down 1.63%. Despite these losses, analysts at Piper Sandler noted that geopolitical risks impacting oil prices have decreased as tensions between Israel and Iran ease.
Despite this positive news for investors, Piper also cautioned that the market is currently moving sideways with limited downside risk due to growing demand for oil from refiners operating near capacity and minimal capacity additions.
Overall, it seems that despite fluctuations in global inventories and geopolitical tensions impacting oil prices, long-term demand for oil remains strong as refiners continue to operate near capacity with minimal additions available.