Oil prices fell for a second consecutive day on Thursday, weighed down by a significant rise in U.S. fuel inventories, the world’s largest oil consumer. Despite this, forecasts for rising winter fuel demand and concerns about tightening supply helped limit the declines.
By 0409 GMT, Brent crude futures had decreased by 8 cents, settling at $76.08 per barrel, while U.S. West Texas Intermediate (WTI) crude futures dropped 11 cents to $73.21. Both benchmarks were down by approximately 0.1% compared to the previous session.
On Wednesday, both oil futures saw a drop of more than 1%, pressured by a stronger dollar and larger-than-expected gains in U.S. fuel stockpiles.
The U.S. Energy Information Administration (EIA) reported a sharp increase in gasoline inventories, which rose by 6.3 million barrels last week to 237.7 million barrels. Analysts had anticipated a much smaller build of 1.5 million barrels. Distillate stockpiles, which include diesel and heating oil, grew by 6.1 million barrels, surpassing the expected 600,000-barrel rise.
However, crude oil inventories experienced a modest decline of 959,000 barrels, contrary to analyst expectations for a 184,000-barrel drawdown.
“While the increase in U.S. fuel inventories has triggered some selling, the downside is limited due to the approaching winter demand season in the Northern Hemisphere,” noted Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities.
JPMorgan analysts forecast that global oil demand will rise by 1.4 million barrels per day in January, bringing total demand to 101.4 million barrels per day. This growth is largely driven by increased heating fuel usage in the Northern Hemisphere.
“Global oil demand is expected to remain robust throughout January, driven by colder-than-usual winter conditions that are boosting heating fuel consumption, as well as an earlier start to travel in China ahead of the Lunar New Year holidays,” the analysts stated.
Despite the price declines, market indicators show that traders are becoming increasingly concerned about potential supply tightening as demand rises. The premium for the first-month Brent contract over the six-month contract reached its widest since August on Wednesday. This backwardation—where near-term futures are priced higher than longer-dated contracts—is generally seen as a sign of decreasing supply or rising demand.
Looking ahead, key factors influencing the market include demand trends in China, U.S. energy policies under the incoming administration, and the geopolitical impact of the Russia-Ukraine conflict. Kikukawa added that traders may be hesitant to take large positions until President-elect Donald Trump’s policies become clearer following his inauguration on January 20.
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