Oil prices experienced a volatile trading session on Thursday, reversing early gains due to a substantial build in U.S. crude stockpiles, which outweighed the expectations that U.S. interest rates may have peaked.
Brent crude futures managed to settle with a modest gain of 18 cents, reaching $86.00 per barrel, while U.S. West Texas Intermediate (WTI) crude fell by 58 cents to settle at $82.91 a barrel. Earlier in the session, oil prices had risen by over $1 a barrel.
However, these gains were pared back after the U.S. government released data revealing a significant increase in U.S. crude inventories. The data showed that U.S. crude stockpiles surged by 10.2 million barrels during the past week, reaching a total of 424.2 million barrels. This figure was substantially higher than the expected rise of 500,000 barrels anticipated by analysts.
Several factors contributed to this crude build, including lower refining utilization rates and higher net imports. It is worth noting that refineries have undergone maintenance, which temporarily reduced their operational capacity.
Additionally, the U.S. crude output hit a record high of 13.2 million barrels per day during the week.
The news of rising crude inventories led to a bearish sentiment in the market, countering the earlier gains. Despite economic data showing slowing U.S. inflation, suggesting that the Federal Reserve may pause interest rate hikes, the oversupply concerns in the oil market were more dominant.
Despite this bearish tone, other factors have supported crude oil prices. World shares increased, and the dollar and bond market borrowing costs remained steady. This stability in the financial markets contributed to the positive sentiment in the oil market.
Furthermore, both Saudi Arabia and Russia reiterated their commitment to collaborate in stabilizing oil markets. Saudi Energy Minister Prince Abdulaziz bin Salman emphasized the importance of proactive measures to ensure market stability, particularly amid concerns of disruptions in oil supplies from the Middle East due to regional conflicts.
Russian Deputy Prime Minister Alexander Novak expressed confidence that the current oil price already factored in the Middle East conflict, indicating that the risk to oil supplies from the region was not substantial.
It’s important to note that despite these factors, oil prices remain susceptible to global economic conditions and supply dynamics. The International Energy Agency (IEA) lowered its oil demand growth forecast for 2024, suggesting that harsher global economic conditions and advancements in energy efficiency would impact consumption.
In contrast, the Organization of the Petroleum Exporting Countries (OPEC) maintained its outlook for relatively strong demand growth in the coming year.
The oil market is continually influenced by various factors, including economic conditions, production levels, geopolitical events, and international cooperation among major oil-producing nations.
