Global benchmark Brent crude oil futures fell 0.3% to $77.38 barrel. US WTI crude futures fell 10 cents to $72.14 barrel
NEW YORK: Oil prices fell on Wednesday after a surprise jump in US crude stockpiles raised worries about demand in the largest oil market.
Global benchmark Brent crude oil futures fell 21 cents, or 0.3 percent, to $77.38 a barrel. U.S. West Texas Intermediate crude futures fell 10 cents to $72.14 a barrel.
Early in the session, both contracts had risen by more than a dollar before the U.S. Energy Information Administration reported a surprise build in crude oil stockpiles and larger-than-expected jumps in storage of gasoline and distillates.
“Today’s EIA report highlights investor concerns of slowing demand growth,” said Rob Haworth, senior investment strategist at U.S. Bank Asset Management. EIA said the US crude production will hit records over the next two years but grow at a slower rate, as efficiency gains offset a decline in rig activity.
The rise in US output comes as the Organization of the Petroleum Exporting Countries and its allies are cutting their own output in a bid to boost oil prices. US crude production will rise by 290,000 barrels per day (bpd) to a record 13.21 million bpd this year, the EIA said in its Short-Term Energy Outlook (STEO).
The EIA forecast OPEC+ production, excluding Angola which left the bloc in January, would fall by 620,000 barrels per day to 36.44 million barrels per day next year. That was down from a five-year average of 40.2 million bpd before the Covid-19 pandemic.
Worries of rising supply and weak demand for light crude also pushed Saudi Arabia to cut the February official selling price (OSP) of its flagship Arab Light crude to Asia to the lowest level in 27 months.
While U.S production is set to climb to new records in 2024 and 2025 due to well efficiencies, the growth is set to slow from the 1 million bpd growth in 2023 due to lower drilling activity. Prices for global benchmark Brent crude is expected to average $82 per barrel in 2024 and $79 in 2025, close to the 2023 average of $82, EIA said.
Meanwhile, US crude inventories rose by 1.3 million barrels in the week ended Jan. 5 to 432.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 700,000 barrel drop.
Gasoline stocks rose by 8 million barrels while distillate stocks jumped by 6.5 million barrels, the EIA reported. “Investors appear caught between ongoing conflicts, which are escalating oil transit costs in parts of the world, soft global economic growth and potential Federal Reserve interest rate cuts starting in March, which could spur economic activity,” Haworth said.
Europe’s weak economic outlook also added to oil demand concerns. The euro zone may have been in recession last quarter and prospects remain weak, European Central Bank Vice President Luis de Guindos said on Wednesday.
Limiting some losses, investors continue worry about potential supply concerns in the Middle East arising from the Israel-Hamas war. On Sunday Libya’s National Oil Corporation (NOC) declared force majeure at its Sharara oilfield, which can produce up to 300,000 barrels per day.
