Oil prices fall on demand concerns after US stock build
2023.12.20 21:44
© Reuters. Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base
By Yuka Obayashi
TOKYO (Reuters) – Oil prices fell on Thursday, as concerns over low demand following a surprise inventory build outweighed jitters over global trade disruptions and geopolitical tensions in the Middle East.
futures fell 65 cents, or 0.8%, to $79.05 a barrel by 0120 GMT while U.S. West Texas Intermediate crude was at $73.67 a barrel, down 55 cents, or 0.7%.
Both benchmarks edged up on Wednesday as investors worried about trade disruptions as major maritime carriers chose to steer clear of the Red Sea route, with longer voyages increasing transport and insurance costs.
“Market focus returned to sluggish global demand as the impact on the Red Sea is seen to be limited on oil as long as it does not spill over into the Strait of Hormuz,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.
“A build in U.S. crude stocks and record domestic oil production also added to pressure,” he said.
The U.S. Energy Information Administration (EIA) said on Wednesday that U.S. crude inventories rose by 2.9 million barrels in the week to Dec. 15 to 443.7 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.3 million barrel drop.
EIA also said U.S. crude output rose to a record 13.3 million barrels per day (bpd) last week, up from the prior all-time high of 13.2 million bpd.
For shipping, about 12% of world traffic passes up the Red Sea and through the Suez Canal. However, the impact on oil supply has been limited so far, analysts said, because the bulk of Middle East crude is exported via the Strait of Hormuz.
“Since there will be no additional production cuts by OPEC+ this year, oil prices will likely remain in range through the end of the year, with focus on key economic statistics and the U.S. dollar’s reaction to them,” said Naohiro Niimura, a partner at Market Risk Advisory, a research and consulting firm.
He predicted WTI would trade between $70 and $75 this month.
The U.S.-led coalition imposing a price cap on seaborne Russian oil announced changes on Wednesday to its compliance regime that the Treasury Department said would make it harder for Russian exporters to bypass the cap.
