Oil slips as traders mull surprise increase in US stocks
‘Demand growth is starting to moderate and the picture for the latter half of the year is looking increasingly bleak,’ says Vanda Insights
New Delhi — Oil prices fell on Thursday, after rising sharply in the first half of the week, as traders weighed a larger-than-expected build in US oil stocks against tightening global supply.
Brent futures were down 45c, or 0.4%, at $108.33 a barrel, while US West Texas Intermediate futures were off 69c, or 0.7%, at $103.56 a barrel at 3.54am GMT.
Both contracts on Wednesday had shrugged off a large build in US crude inventories to end the trading session about 4% higher.
“Demand growth is starting to moderate and the picture for the latter half of the year is looking increasingly bleak,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
However, the oil complex is heavily focused on the short term and fears of supply shortages are crowding out that view, she said.
The International Energy Agency (IEA) on Wednesday warned that from May onwards about 3-million barrels a day of Russian oil could be shut-in due to sanctions or voluntary embargoes.
The probability of a EU ban on Russian oil being agreed may be almost zero, but no-one will be able or wanting to say that clearly, Hari said.
“And, even a continuing sabre-rattling will be enough to keep the risk premium alive.”
At the same time, major global trading houses are also planning to curtail crude and fuel purchases from Russia's state-controlled oil companies in May, Reuters reported on Wednesday.
Despite signals that global supply disruption will persist, oil stocks in the US rose by more than 9-million barrels last week, the US Energy Information Administration said on Wednesday, driven in part by releases from the nation's strategic reserves. Analysts in a Reuters poll had anticipated just an 863,000-barrel build.
US petrol stocks fell 3.6-million barrels last week, far above expected levels, and distillate inventories also declined.
“Oil prices are looking very comfortable above the $100 level as US and Chinese demand seems to be heading in the right direction,” wrote Edward Moya, a senior analyst with Oanda.
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