Updated December 21st, 2023 at 16:44 IST
Oil prices fall on US inventory build up, demand concerns
Brent crude futures witnessed a 0.8 per cent decline, down by 65 cents to $79.05 a barrel.
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Global oil prices dipped on Thursday amid worries about diminished demand, triggered by an unexpected surge in US crude inventories, overshadowing concerns related to international trade disruptions and geopolitical tensions in the Middle East.
Brent crude futures witnessed a 0.8 per cent decline, down by 65 cents to $79.05 a barrel by 0120 GMT, while US West Texas Intermediate crude slipped 0.7 per cent, down 55 cents to $73.67 a barrel.
Despite slight gains on Wednesday, driven by apprehensions over trade disruptions due to major maritime carriers avoiding the Red Sea route, the focus has shifted back to concerns about sluggish global demand. The Red Sea situation is deemed to have limited impact on oil unless it spills over into the crucial Strait of Hormuz, according to Tsuyoshi Ueno, Senior Economist at NLI Research Institute.
Adding to the downward pressure, the US Energy Information Administration (EIA) reported on Wednesday that US crude inventories unexpectedly rose by 2.9 million barrels in the week ending December 15, reaching 443.7 million barrels. This contrasted with analysts' expectations of a 2.3 million barrel decline, contributing to the market unease.
Moreover, the EIA highlighted a record-breaking US crude production, reaching 13.3 million barrels per day, surpassing the prior high of 13.2 million bpd. Analysts suggest that these factors collectively intensify concerns about oversupply and weakened demand.
While about 12 per cent of global shipping transits through the Red Sea and the Suez Canal, experts noted that the impact on oil supply has, so far, been limited since the majority of Middle East crude is exported through the Strait of Hormuz.
Naohiro Niimura, a partner at Market Risk Advisory, anticipates that without additional production cuts by OPEC+, oil prices are likely to remain within a certain range until year-end. He predicts West Texas Intermediate to trade between $70 and $75 this month.
In a separate development, the US-led coalition enforcing a price cap on seaborne Russian oil announced changes to its compliance regime on Wednesday. The alterations are intended to make it more challenging for Russian exporters to circumvent the imposed cap, according to statements from the Treasury Department.
(With Reuters inputs)
Published December 21st, 2023 at 07:40 IST