saudi arabia has led an effort to backstop oil prices with a series of production cuts saudi arabia’s move to reduce crude output was designed to prop up global oil markets the past week has shown how difficult that will be prices have fallen in four of the past five sessions and are now hovering near 2023 lows with traders parsing betterthanexpected production by sanctioned countries including russia and iran and fears of an international industrial slowdown that could slow growth in fuel demand the eurozone slid into a recession last week partly because of weakness in the german export juggernaut china’s postpandemic recovery has shown signs of losing steam and in the us where much of the economy has proven resilient the federal reserve on wednesday signaled the potential for more rate increases later this year to curb inflation on wall street even the most bullish analysts have cut oil forecasts in response speculators more than quadrupled short positions on us crude between april 18 and may 30 according to the commodity futures trading commission while exchangetraded funds that track oil prices have seen outflows in recent weeks other investors have stepped away from commodity markets more broadly this year the fed’s interestrate increases have pushed up the cost of borrowing and made safer investments such as bonds and moneymarket funds more enticing by comparison the rocky stretch has dinged exporters including saudi arabia and knocked energy stocks out of a broader market rally driven by innovations in artificial intelligence shares in chevron and conocophillips this year have slid around 13 while exxon mobil is down roughly 5 “at the moment we’re kind of sitting on the sidelines” of commodity markets said michael kelly global head of multiasset for pinebridge investments “many of us are huddled out in some sort of fixed income” the pessimism helped drive the price of brent crude the global price gauge to 7184 a barrel on monday its lowest level in 18 months benchmark futures contracts have since clawed back some of those losses closing wednesday at 7320 after the international energy agency projected that global appetite for oil will hit a record this year the declines have helped slow inflation in the form of reduced input costs for petrochemicals used in plastics and many other products as well as lower prices at the pump for american drivers a year ago tuesday the average us retail gasoline price recorded by the energy information administration hit 511 a gallon its highest nominal level in at least 30 years nationwide prices have since dropped more than 27 as the summer driving season kicks into high gear while saudi arabia and other members of the organization of the petroleum exporting countries have attempted to backstop oil prices in recent months with a series of production cuts they have contended with global pressure spanning physical and financial markets russia’s seaborne crude exports were up 18 through june 11 compared with the same period in 2022 according to tankertrackerscom surging in the face of western restrictions that many analysts expected to curb supplies the online research firm put iranian shipments which face us sanctions up 45 year over year those and other new supplies have arrived as businesses across the us and europe pulled back on imports cutting global demand for the use of fuelhungry cargo ships carrying containers of goods across oceans and dieselguzzling trucks hauling the products to warehouses and stores “manufacturing globally is already contracting” saad rahim chief economist for trafigura wrote in the trading house’s midyear financial report some analysts expect oil prices to rebound in the second half as opec cuts take hold petroleum inventories dwindle and growth in domestic output slows us producers recently idled 15 rigs that drill for crude in a week the sharpest decline in oilpatch activity since the covid lockdowns those changes will play out in what bank of america recently described as a battle royal between physical commodity markets and central bankers fed officials voted unanimously on wednesday to pause rate increases but a majority penciled in two more increases this year and lifted expectations for us growth and inflation some economists said higher rates could bog down sectors such as manufacturing and mining and make loans that companies need to hold petroleum inventories more costly better returns from other types of assets could also serve to push investors away from oil even if global crude markets tighten said francisco blanch a commodities and derivatives analyst at bank of america “ultimately the monetary forces are very big” he said adding that they will weigh down crude prices until central bankers lower rates “when the fed changes its tune we’re going to see the commodity price backdrop improving manyfold” blanch said “that will make the fed’s job more difficult”