Oil Prices Fall in Asian Trade
Concerns Over US Inventory Shock and Demand
Oil prices extended losses in Asian trade on Thursday, following a larger-than-expected build in U.S. inventories. This build pointed to well-supplied markets, while Japanese recession signals raised concerns over slowing demand.
Crude Prices Drop After US Inventory Data
Crude prices plummeted by over $1 each on Wednesday, triggered by data showing a substantial increase of 12 million barrels in U.S. inventories. This figure was much higher than the expected build of 3.3 million barrels.
Record-High US Production Affects Oil Supply
The reading was primarily driven by record-high U.S. production, indicating that the world’s largest fuel consumer remained well-supplied with oil.
Weakening US Fuel Demand Amid Economic Pressure
While gasoline and distillate inventories shrank, the drop was attributed largely to extended refinery shutdowns due to maintenance activity. U.S. fuel demand was seen weakening in recent months amid adverse weather and increasing economic pressure from high inflation and interest rates.
Oil Prices Decline in Asian Trade
Oil prices for April delivery sank 0.4% to $81.26 a barrel, while Brent crude fell 0.4% to $76.03 a barrel by 20:53 ET (01:53 GMT).
Japanese Recession Signals
GDP data from Japan showed the country unexpectedly entered a technical recession in the fourth quarter, amid persistent weakness in private consumption.
Global Economic Concerns Impact Oil Demand
The weak economic readings, coupled with recent indicators that U.S. interest rates will remain higher for longer in 2024, factored into concerns that cooling economic activity will keep oil demand subdued in the coming months.
US Inflation Affects Oil Prices
A strong U.S. dollar also weighed on crude, with the greenback trading near three-month highs after data showed U.S. inflation remained sticky in January, giving the Federal Reserve more impetus to keep rates higher for longer.
International Energy Agency Data Release
The International Energy Agency is set to release data later on Thursday, which comes just days after the Organization of Petroleum Exporting Countries left its outlook for global crude demand unchanged.
Supply Disruptions in the Middle East
Oil prices were sitting on some gains over the past two weeks, aided chiefly by persistent concerns over supply disruptions in the Middle East, after an Israel-Hamas ceasefire fell through.
China, US, and Euro Zone Impact on Oil Prices
A recent Reuters report also showed that moves by China, the U.S., and the euro zone to replenish depleted sovereign reserves could provide oil prices with some support in the coming months.
Focus on Upcoming OPEC Meeting
An OPEC meeting scheduled for March is now in focus, particularly to gauge whether the cartel will maintain its production cuts in the near-term.
