Oil Slumps over Bearish EIA Inventory Report
Oil prices declined early on Thursday in the global commodities market following a bearish report of US inventories posted by the US Energy Information Administration (EIA).
The crude oil rally was majorly supported by data showing a decline in crude oil demand in the US, the world’s largest oil consumer.
ICE Brent dropped by 0.4% to $81.27 per The American benchmark, West Texas Intermediate (WTI), traded at the same time at $76.28 per barrel, down 0.47% from Wednesday’s close of $76.64 per barrel.
Data released by US EIA on showed that US commercial crude oil inventories increased by 12 million barrels to 439.4 million barrels during the week ending Feb. 9. This exceeded the market expectation of an inventory increase of around 8.5 million barrels.
The larger-than-expected build in stocks signalled a drop in demand in the US, the world’s largest economy, putting downward pressure on oil prices.
Meanwhile, the ongoing conflict in the Red Sea and the Middle East continues to affect price fluctuations by fuelling concerns about global supply disruptions and placing upward pressure on prices.
US and British forces launched new airstrikes in Yemen’s coastal province of Hudaydah on Wednesday, the Houthi group said.
The attacks come in retaliation against the Houthis targeting cargo ships in the Red Sea owned or operated by Israeli companies or transporting goods to and from Israel in solidarity with the Gaza Strip.
With tensions escalating due to joint airstrikes carried out by the US and UK against Houthi targets in Yemen, the group declared that it considered all American and British ships to be legitimate military targets.
US and British forces have targeted Yemen with 403 airstrikes since January, Yemen’s Houthi group said Wednesday.
The oil market came under pressure yesterday. ICE Brent settled a little more than 1.4% lower on the day. According to ING commodities strategists, the catalyst for the move appears to be a bearish EIA inventory report, which showed that US commercial crude oil inventories increased by 12.02m barrels over the last week.
The move was largely driven by lower refinery utilisation rates which fell by 1.8pp week on week to 80.6%, ING said in a note. 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 gasoline stocks declined by 3.66m barrels over the week. This is the second straight week of drawdowns, which has pushed US gasoline inventories below their 5-year average.
Global natural gas markets remain under pressure with comfortable storage levels in both the US and Europe, as we move closer to the end of the heating season, while forecasts for milder weather have added further pressure.
European storage is a little more than 66% full, above the 5-year average of 51% for this time of year. The latest US storage data will be released today and the expectation is that storage fell by around 66bcf over the last week, considerably less than the 5-year average of 149bcf.
On the energy calendar for today, in addition to the US weekly natural gas storage report, the IEA will also release its monthly oil market report. This follows OPEC’s monthly report earlier this week. #Oil Slumps over Bearish EIA Inventory Report
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