Oil price eases amid concerns of slowing demand

Tokyo — Oil prices fell on Thursday and were on track to snap a three-day winning streak. Concerns over low demand after a surprise US crude inventory build-up outweighed jitters over global trade disruptions due to tensions in the Middle East.

Brent crude futures had fallen 22c, or 0.3%, to $79.48 a barrel by 3.03am GMT, while US West Texas Intermediate (WTI) crude was at $74 a barrel, also down 22c, or 0.3%.

Both benchmarks ended higher on Wednesday for a third straight session, as investors worried about trade disruptions. Major maritime carriers have chosen 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-up in US crude stocks and record domestic oil production added to pressure,” he said.

The Energy Information Administration (EIA) said on Wednesday 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.

The EIA also said US crude output rose to a record 13.3-million barrels per day (bpd) last week, up from a previous record 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 between the Persian Gulf and the Gulf of Oman.

“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 in December.

The US-led coalition imposing a price cap on seaborne Russian oil announced changes on Wednesday to its compliance regime, which the treasury department said would make it harder for Russian exporters to bypass the cap.

Reuters