Oil prices were mixed on Wednesday after an unexpected stockpile growth in US petroleum stock, driven by record production and declining demand.
The West Texas Intermediate (WTI) crude oil futures for February delivery lifted 1.06% to $74.22 per barrel on December 20. However, industry experts see the US oil benchmark shedding 0.30% to $74.00 a barrel in the coming session.
In contrast, Brent oil February futures retreated 0.09% to $78.01 per barrel, snapping a two-day winning streak. Nevertheless, the market expects a rebound of 0.39% to $79.47 a barrel on Thursday.
The US continued to post record petrol output in the final quarter of 2023. Nonetheless, the country was able to offset the additional production with increased exports of the energy commodity.
Throughout the year, the Organization of the Petroleum Exporting Countries (OPEC) and its allies have reduced their share of the global crude oil market with the output cuts. The US filled the resulting supply void, allowing it to replace Saudi Arabia as the world’s swing petroleum producer.
Still, lower-than-expected growth in many of the world’s top economies has weakened the global demand for petroleum. As a result, economies grew concerned that the US’s crude stockpiles might grow to alarming levels.
Elsewhere, the Houthi militant group vowed to continue its attacks on commercial vessels heading to and leaving Israel. The announcement was made in response to the US military’s creation of a task force to safeguard the Red Sea trade route.
Houthi’s recent maritime assaults had forced shippers to reroute their vessels around the longer South African route.
US Inventories Accumulate Amid Falling Oil Demand
In its December 20 report, the Energy Information Administration (EIA) showed crude oil inventories adding 2.91 million barrels in the week ending December 15. The data reversed the market consensus of a 2.28-million-barrel draw.
The EIA also posted a shortfall of 4.26 million barrels the preceding week. With output for the two weeks at around the same level, the lift in inventories indicated dwindling petroleum demand.
Similarly, the American Petroleum Institute (API) reported a surplus of 0.94 million barrels during the same period. It defied a projected shrinkage of 2.23 million barrels.
China was the primary driver for the fall in oil demand after it reduced its petrol imports. Its weak economy and contracting manufacturing and services sectors have reduced its fuel needs.
