Oil falls due to growth of oil reserves in U. S.
2023.01.11 00:45
Oil falls due to growth of oil reserves in U. S.
By Tiffany Smith
Budrigannews.com – On Wednesday, concerns about demand were rekindled by an unexpected rise in crude and fuel inventories in the United States, the world’s largest consumer of oil.
At 0503 GMT, U.S. West Texas Intermediate (WTI) crude futures fell by 79 cents, or 1.1 percent, to $74.33 a barrel, and futures fell by 75 cents, or 0.9 percent, to $79.35 a barrel.
After a sharp selloff in the first week of 2023, both contracts rose during trading on Monday and Tuesday.
According to sources who cited data from the American Petroleum Institute (API), oil stockpiles increased by 14.9 million barrels during the week that ended on January 6. Distillate stocks, which include jet fuel as well, increased by approximately 1.1 million barrels at the same time.
Reuters polled analysts and found that distillate stocks would fall by 500,000 barrels and crude stocks would fall by 2.2 million barrels.
According to analyst Leon Li at CMC Markets, the short-term uptrend in oil prices is being capped by the risk of a recession and the significant increase in U.S. inventories in API estimates.
Traders will be keeping an eye out for inventory data from the United States Energy Information Administration, which is due later on Wednesday, to see if it matches the API’s preliminary view. EIA/S] Concerns about U.S. interest rate hikes to curb inflation, which would set off a recession and reduce fuel demand, have pushed the oil market lower.
According to Claudio Galimberti, a senior vice president at Rystad Energy, in an email, the current market sentiment is bearish on the demand side because China is still dealing with a widespread COVID-19 outbreak, the United States and Europe are at risk of an economic slowdown as a result of rising interest rates, and supply disruptions are minimal for the time being.
This weakness is reflected in the futures market structure, with both the front-month Brent and WTI contracts remaining in contango. This is a situation in which prices for the prompt month are trading lower than prices for the forward month. This typically indicates that there is less demand for oil in the short term.
China, the world’s second-largest oil consumer, eased its COVID-19 restrictions earlier this week and resumed international travel, boosting fuel demand.
According to ANZ Research analysts in a note, “Monday’s news that China had issued a fresh batch of import quotas suggests the world’s largest importer is ramping up to meet higher demand.”
The U.S. inflation data, which are due on Thursday, are the main topic this week. Analysts predicted that the dollar would fall if inflation fell short of expectations. Because it makes the commodity more affordable for buyers who hold other currencies, a weaker dollar can increase oil demand.
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