Oil edged lower following its first weekly gain this month, as investors start to focus on the outlook for the second half of the year.

West Texas Intermediate fell toward $71 a barrel after climbing by more than 2% last week as China cut interest rates and hinted that further stimulus may be delivered. Additional support for prices came as the Federal Reserve paused its run of monetary tightening to assess the outlook for inflation.

Crude trading volumes on Monday, especially for WTI, may be lower than usual as the US marks the Juneteenth holiday.

Oil has retreated in the first half of the year as China’s recovery from Covid Zero underwhelmed and global supplies remained abundant, including from Russia. In a bid to stem the slide, the Organization of Petroleum Exporting Countries and its allies have announced supply cuts, including a voluntary reduction from Saudi Arabia of 1 million barrels a day that’ll start from July.

Both OPEC and the Paris-based International Energy Agency, which advises rich nations, have forecast that the crude market will tighten substantially in the second half. Still, WTI’s prompt spread remains in backwardation, a bearish pricing pattern that indicates ample near-tern supply. Crude stockpiles at the key hub in Cushing, Oklahoma, have swelled to a two-year high.

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Author: Jake Lloyd-Smith