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Jeddah - Yasmine El Tohamy - SINGAPORE: Oil prices on Thursday extended declines from the previous session after a larger-than-expected build in US crude stockpiles stoked worries about slow demand, while signs that US interest rates could remain elevated added to pressure, according to Reuters.
Brent crude futures fell 14 cents, or 0.2 percent, to $83.54 a barrel by 7:20 a.m. Saudi time. US West Texas Intermediate crude futures were down 4 cents, or 0.1 percent, to $78.50 a barrel.
US crude oil stockpiles rose while gasoline and distillate inventories fell last week as refiners ran at below seasonal lows due to planned and unplanned outages, the Energy Information Administration said on Wednesday.
Crude inventories rose for the fifth consecutive week, increasing by 4.2 million barrels to 447.2 million barrels in the week ended Feb. 23, the EIA said, compared with analysts’ expectations in a Reuters poll for a 2.7 million-barrel rise.
“Large stockpiles heightened investors’ worries over a slow economy and reduced oil demand in the US,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
“The anticipation of delayed US rate cuts also weighed on the market sentiment as it could undermine oil demand,” he said.
High borrowing costs typically reduce economic growth and oil demand.
Traders have already dialled back expectations for US interest rate cuts after a slew of strong data, including hot consumer price index and producer price index readings. They expect an easing cycle to kick off in June, compared with the start of 2024 when bets were on March.
Market participants are now waiting for the US personal consumption expenditures price index, the Federal Reserve’s preferred measure of inflation, for more trading cues.
The index, to be released on Thursday, is expected to show prices ticked up 0.3 percent on a monthly basis in January.
The market also eyed the possible extension of voluntary oil output cuts from OPEC and its allies, known as OPEC+, which has limited price declines for now.
“With the demand outlook remaining uncertain, we think OPEC will extend the current supply agreement to the end of the second quarter,” ANZ analysts Daniel Hynes and Soni Kumari said in a client note.
The price outlook remains unchanged, the analysts added, projecting 2024 annual average prices at $86 a barrel for Brent and $81 a barrel for WTI.
The conflict in the Middle East is also expected to keep a floor under oil prices, Rakuten’s Yoshida said.
Hamas urged Palestinians on Wednesday to march to Jerusalem’s Al-Aqsa Mosque at the start of Ramadan next month, raising the stakes in negotiations for a truce in Gaza, which US President Joe Biden hopes will be in place by then.
But both Israel and Hamas have played down the prospects for a truce and Qatari mediators have said the most contentious issues are still unresolved.
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