Oil falls amid worry about US demand

Singapore — Oil prices fell on Thursday after a larger-than-expected jump in US crude inventories, raising concern about demand in the world’s largest economy and top oil consuming nation.

Brent crude futures fell 34c, or 0.4%, to $81.26 a barrel at 3.37am GMT, while US West Texas Intermediate (WTI) crude futures declined 38c, or 0.5%, to $76.26 a barrel.

Both contracts lost more than $1 a barrel on Wednesday, pressured by the rise in US crude inventories, as refining dropped to its lowest levels since December 2022.

The Energy Information Administration (EIA) said US crude inventories jumped by 12-million barrels to 439.5-million barrels in the week to February 9, far exceeding analysts’ expectations in a Reuters poll for a 2.6-million-barrel rise.

While the stock build-up raised concern among traders about demand, some analysts said the move was largely driven by lower refinery utilisation rates, especially with BP’s 435,000 barrels a day (bbl/day) Whiting plant in Indiana down.

“The continued outage at BP’s Whiting refinery will have contributed to lower run rates, along with some other refinery maintenance. Lower refinery run rates meant that [petrol] stocks declined,” the analysts said.

On the supply side, Kazakhstan said it will compensate for its oil overproduction in January within the next four months, in line with its Opec+ commitments. Iraq also said it will review its oil production and address any excess output above its Opec+ voluntary cuts in the coming four months, if found.

“This comes ahead of Opec’s March meeting, where the group plans to decide whether to extend supply curbs into the second quarter,” said ANZ analysts in a note on Thursday, referring to oil cartel Opec.

“Any signs that extension looks unlikely would weigh on sentiment across the oil market.”

However, the EIA data also showed that petrol and distillate stocks fell more than forecast. Petrol stocks fell by 3.7-million barrels to 247.3-million barrels versus expectations for a 1.2-million-barrel draw.​

Distillate stockpiles declined by 1.9-million barrels to 125.7-million barrels, compared with expectations for a 1.6-million-barrel drop.

Fuel demand is holding up, helped by a return to pre-Covid levels of air travel, JPMorgan analysts said.

“Our high frequency demand indicators are showing oil demand increasing by 1.6-million barrels a day in the first two weeks of February versus January,” JPMorgan Commodities Research analysts said in a note, pointing to a pickup in travel in China during the Lunar New Year holiday.

Reuters