By Adedapo Adesanya
Oil settled lower on Thursday even as there was a larger-than-expected crude stock draw in the world’s largest oil producer, the US, with Brent down by 66 cents or 0.8 per cent to close at $77.59 per barrel and the US West Texas Intermediate (WTI) crude futures down by 51 cents or 0.7 per cent to $72.19 per barrel.
Low fuel demand and large inventory increases in data from the US Energy Information Administration (EIA) weighed on prices following reported substantial builds for the week of December 29.
In crude oil, the authority estimated an inventory decline of 5.5 million barrels for the last week of 2023 versus a weekly inventory draw of 6.9 million barrels for the previous week, when fuel inventories posted mixed inventory changes with gasoline (petrol) stocks falling and middle distillate inventories swelling.
A day before the EIA released its report, the American Petroleum Institute (API) reported an estimated 7.4 million-barrel draw in crude oil inventories, accompanied by sizeable inventory builds in gasoline and middle distillates, both of over 6 million barrels.
Prices were up earlier on Thursday amid an outage at Libya’s largest producing field, Sharara and heightened tensions in the Middle East.
The Sharara field has been blocked by protests while the latest in the Middle East is another attack by Yemen’s Houthis on a cargo ship in the Red Sea.
Following these developments, Brent crude moved closer to $80 per barrel earlier today while West Texas Intermediate ticked up higher above $70 per barrel in earlier sessions.
Market analysts also said the situation in the Red Sea has forced a lot of refiners and buyers of crude oil to go to the US rather than sail their boat around the Horn of Africa, the longer alternative route.
Yemen’s Iran-backed Houthis said they had targeted a container ship bound for Israel, adding to concerns about the shipping route that accounts for more than 10 per cent of the world’s trading.
Meanwhile, economic data pressured oil as Euro zone business activity shrank in December.
HCOB’s Composite Purchasing Managers’ Index (PMI), compiled by S&P Global and seen as a good gauge of overall economic health in the bloc, was revised up for December to match November’s 47.6 after a preliminary estimate of 47.0, but it remained below the 50 mark separating growth from contraction for a seventh month.
Also, Germany’s inflation rose and indicated that the European Central Bank (ECB) could keep interest rates steady for some time.
Dipo Olowookere