Oil is heading to end its winning streak as US inventories rise

Price action

By 0303 GMT, Brent crude futures fell 22 cents, or 0.3 percent, to $79.48 per barrel. US West Texas Intermediate crude also fell 22 cents, or 0.3 percent, at $74 a barrel.

The two benchmark crude oil prices rose at settlement yesterday, Wednesday, for the third session in a row, with investors feeling concerned about trade disruptions in light of major shipping companies choosing to move away from the Red Sea and take a longer sea route, which leads to increased transportation and insurance costs.

“The market’s focus has returned to the slowdown in global demand as the impact on the Red Sea is seen as limited to oil as long as it does not extend into the Strait of Hormuz,” said Tsuyoshi Ueno, chief economist at NLI Research Institute.

He added, “Rising crude inventories and the record increase in domestic oil production in the United States are adding to the pressure.”

The US Energy Information Administration said on Wednesday that US crude inventories rose by 2.9 million barrels in the week ending December 15 to 443.7 million barrels, compared to analysts’ expectations in a Reuters poll of a decline of 2.3 million barrels.

The administration also stated that US crude production rose to a record level of 13.3 million barrels per day last week, exceeding the previous highest level ever at 13.2 million barrels per day.

For shipping, about 12 percent of global traffic passes through the Red Sea and the Suez Canal. However, analysts say the impact on oil supplies has been limited so far because the bulk of Middle East crude is exported through the Strait of Hormuz.

“Given the lack of additional production cuts by OPEC+ this year, oil prices are likely to remain in that range until the end of the year, with the focus on key economic statistics and the dollar’s ​​reaction,” said Naohiro Nimura, partner at Market Risk Advisory, a research and consulting firm. on her”.

Nimura expects West Texas Intermediate crude oil to trade between $70 and $75 this month.

The US-led coalition, which imposes a price ceiling on Russian oil transported by sea, announced changes to its compliance system yesterday, Wednesday. The Treasury said the changes will make it more difficult for Russian exporters to exceed this price ceiling.