Oil prices set to end winning streak over US stock build

December 22, 2023

Oil prices fell today and were on track to snap a three-day winning streak, as concerns over low demand following a surprise US crude inventory build outweighed jitters over global trade disruptions due to tensions in the Middle East.

Brent crude futures fell 22 cents, or 0.3%, to $79.48 a barrel early this morning, while US West Texas Intermediate crude was at $74 a barrel, also down 22 cents or 0.3%.

Both benchmarks ended higher yesterday for a third session in a row, as investors worried about trade disruptions given 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 US crude stocks and record domestic oil production also added to pressure,” he said.

The US Energy Information Administration (EIA) said yesterday that US crude inventories rose by 2.9 million barrels in the week to December 15 to 443.7 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.3 million barrel drop.

EIA also said US 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 US 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 US-led coalition imposing a price cap on seaborne Russian oil announced changes yesterday to its compliance regime that the Treasury Department said would make it harder for Russian exporters to bypass the cap.

Article Source – Oil prices set to end winning streak over US stock build – RTE

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