By Adedapo Adesanya
Prices of crude oil grades fell by nearly 4 per cent on Tuesday resulting from concerns of oversupply after US inflation data showed an unexpected rise in consumer prices.
Brent crude futures for February depreciated by $2.79 or 3.7 per cent to $73.24 a barrel and the US West Texas Intermediate (WTI) crude futures for January slipped by $2.71 or 3.8 per cent to $68.61 a barrel.
In the US, the consumer price index unexpectedly rose in November, further bolstering the view the Federal Reserve was unlikely to cut interest rates early next year.
The US consumer price index (CPI) edged up 0.1 per cent to 3.1 per cent last month after being unchanged in October, the US Labor Department’s Bureau of Labor Statistics said, meaning inflation in the world’s largest oil producer remains above the central bank’s 2 per cent target.
The US lender is expected to leave rates unchanged on Wednesday, with market analysts confident that its policy tightening campaign is over. The central bank has raised its policy rate by 525 basis points to the current 5.25 per cent -5.50 per cent range since March 2022.
Pressure also continued to affect prices with weak demand and concerns that the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ deal to curb supplies will not do enough to balance the market weighed on prices.
OPEC+ agreed to limit supplies by 2.2 million barrels per day in the first quarter, but there are worries that many won’t agree to the move.
Saudi Arabia and Russia account for 1.5 million barrels per day of the 2.2 million barrels per day of cuts—but those cuts were already agreed upon and in place and therefore do not represent additional production cuts.
The US Energy Information Administration (EIA) lowered its 2024 price forecast for Brent crude by $10 a barrel. Brent would average $83 per barrel, the administration forecast in a monthly report, versus an estimate published last month of $93 per barrel.
Crude oil inventories in the US fell this week by 2.349 million barrels for the week ending December 8, according to the American Petroleum Institute (API), after a 594,000-barrel build in crude inventories in the week prior.
US official government data from the EIA on stockpiles is due later on Wednesday.
In the Middle East, Yemen’s Houthis said they attacked a Norwegian commercial tanker in their latest protest against Israel’s bombardment of Gaza, escalating the risk of supply disruptions in the region.
Meanwhile, at the COP28 climate summit, negotiators are awaiting a new draft deal after many countries criticised a previous version as too weak because it did not include an agreement to phase out fossil fuels.
