Growing U.S. oil inventories sent crude oil prices sliding by a dollar a barrel in Wednesday’s trading. Investors fear the growing crude inventory could result in less demand for oil in the nation.
West Texas Intermediate, the US benchmark, dropped $1.23 or 1.6% to settle at $76.64 a barrel on the New York Mercantile Exchange.
Brent, the global benchmark for crude, rose to $83.19/barrel on Tuesday evening, moving up by $1.19 when compared to its cost the preceding day, as latest data from the Federal Government indicated that Nigeria’s oil output increased to 1,426,574 barrels/day in January 2024.
Oil prices refrained from responding to geopolitical pressure on Monday, instead dropping slightly on solid numbers from the U.S. jobs report and a caution over interest rate cuts.
The latest report from the U.S. Bureau of Labor Statistics showed accelerating job growth for January, with wages seeing a two-year-high increase.
Oil prices jumped 1 percent on Monday on fuel supply concerns after a missile struck a Trafigura-operated fuel tanker in the Red Sea and as Russian refined products exports are set to fall as several refineries are under repair after drone attacks.
Oil rose to the highest in about two months as US inventories, Chinese stimulus and an attack on a Russian refinery ignited a rush of trend-following algorithmic buying.
Oil markets are finally focusing on geopolitical risk, with disruptions in the Red Sea pushing Brent up toward $79 and WTI above $73.
OPEC+ faces record-breaking U.S. oil production and rising supply from other non-OPEC+ producers, including Brazil, Guyana, Canada, and Norway.
Barring a major geopolitical escalation resulting in a large supply outage, oil prices are unlikely to reach $100 a barrel in 2024.
Paul Sankey: Record-high U.S. oil production is a “huge problem” for OPEC+
Hedge funds have cut their bullish bets on crude oil to record lows.
Money managers have slashed their net long positions in both WTI and Brent crude oil by 59,094 lots to just 149,272 in the week ending December 12.
Crude oil prices have been on the decline over the last month, although spot prices for both benchmarks were trading up on Friday.
Oil prices continued to climb on Thursday, with WTI up above $70 and Brent rising to $75.60.
Optimism around both economic growth and oil demand was boosted on Wednesday when the Fed signaled it would cut interest rates next year.
The Fed’s comments also triggered a rally in stocks, bonds, and gold, and sent the U.S. dollar to a four-month low.
Saudi Arabia reduced the official selling price of its flagship crude by $0.50 per barrel for Asian buyers in January.
This is the first price reduction in seven months, although it is a smaller reduction than analysts had expected.
The move was in response to intensified international competition after OPEC production cuts pushed Middle Eastern oil prices higher.