WTI stabilizes below $110.00 ahead of OPEC meeting, oil stockpiles plunge

• The oil prices have turned balance after a 4% fall ahead of the OPEC meeting.
• Western central banks have raised concerns over growth forecasts amid higher inflation rates.
• The expectations of additional oil output by the OPEC won’t be able to offset the supply worries.

West Texas Intermediate (WTI), futures on NYMEX, is oscillating in a narrow range of $108.10-108.41 in the early Tokyo session. The black gold has turned sideways after displaying a steep fall from Wednesday’s high at $112.73. Investors have surrendered their longs from the oil counter amid optimism on additional oil supply in the OPEC meeting on Thursday. The oil prices have fallen more than 4% in the Asian session as Western central banks have shown concerns over the growth forecasts due to the rapid rate hike process.

Traders must be aware of the fact that the global economy is operating on an already tight oil market.  The sanctions on Russia after it invaded Ukraine have restricted a significant amount of oil in the global supply. Fixing the imbalance in the demand-supply mechanism is not a cakewalk. However, the OPEC cartel will do its best to reduce the imbalance and may focus on bringing price stability.

It is worth noting that only two countries from the OPEC cartel carry the potential to release more oil: Saudi Arabia and United Arab Emirates (UAE). The dual is already enjoying more fund inflows due to higher prices and higher supply. Despite the merits of the two catalysts, the economies are unable to produce more oil due to production capacity constraints.  

On the inventories front, the Energy Information Administration (EIA) has reported a significant fall in the oil inventories by US firms. The oil stockpiles slipped by 2.762 million barrels for the week ending June 24. However, the inventories of gasoline and distillates rose by 2.6 million barrels in total for the last two weeks.