Surprise increase in stocks pushes oil lower

Singapore — Oil prices fell for a third day on Thursday, dragged down by a larger-than-expected increase in crude and petrol stocks in the US and easing supply concerns.

Brent futures fell 43c, or 0.50%, to $85.39 a barrel at 6.23am GMT, while US West Texas Intermediate crude retreated 53c, or 0.63%, to $82.96 a barrel.

Both benchmarks have given back most early-week gains after falling more than 2% in the previous session.

US crude oil stockpiles grew by about 12.9-million barrels, according to market sources citing American Petroleum Institute figures on Wednesday.

This was much higher than the 500,000-barrel gain expected by analysts in a Reuters poll.

“Unlikely to help sentiment this morning are API inventory numbers…. Lower refinery run rates due to maintenance likely contributed to this build,” said ING analysts in a client note.

Petrol inventories also rose by 3.6-million barrels, the data showed, a stark contrast from the 800,000-barrel drop expected by analysts and continued to stoke worries of slowing fuel demand in the US.

“Fuel prices may be closer to consumers’ pain threshold than inflation-adjusted prices might suggest. There are already signs that consumers have responded by cutting back on fuel consumption,” JPMorgan analysts said in a client note.

“In PADD 5, of which California is the biggest consumer, we estimate [petrol] demand dropped 100,000 barrels a day between June and September, to a seven-month low of 1.46-million barrels a day,” they said.

Markets will be awaiting further inventory data cues from the US Energy Information Administration (EIA) due later in the day at 3pm GMT.

Elsewhere, market concerns on the supply situation in the Middle East continued to ease, putting downside pressure on prices.

“Crude oil extended losses on signs the impact of the Israel-Hamas war on the oil market will be limited,” ANZ analysts said in a client note.

ING analysts also said: “The risk premium continues to erode with the conflict largely contained to Israel and Hamas.”

The expectation by the US EIA of global oil inventories falling further in the second half of 2023, however, limited price weakness.

The lower inventories, which are forecast to keep global oil supply below consumption, are likely to boost oil prices, the EIA said in a monthly report.

Reuters