Adedapo Adesanya
By Adedapo Adesanya
The prices of major oil futures sank by $1 a barrel on Wednesday as a result of surging US crude inventories, just as a possible security threat to the world’s largest producer might dampen oil demand.
During the session, Brent crude futures depreciated by $1.17 or 1.4 per cent to $81.60 per barrel, and the US West Texas Intermediate (WTI) crude futures fell by $1.23 or 1.6 per cent to $76.64 a barrel.
US crude inventories jumped by 12 million barrels to 439.5 million barrels last week, the Energy Information Administration (EIA) said on Wednesday, in contrast to a build of 5.5 million barrels for the previous week.
The American Petroleum Institute (API) had a day earlier estimated an inventory build of a sizeable 8.52 million barrels for the week to February 9.
Meanwhile, the US Congress intelligence chair, Mr Mike Turner, warned of a serious national security threat’, without providing further details, scaring some oil investors.
Crude oil prices were also affected by geopolitical fears of an escalation in the Middle East after no breakthrough in talks attended by the US, Israel, Egypt, and Qatar, as well as the Russia-Ukraine war.
In the Middle East, strikes launched from Lebanon into northern Israel reportedly wounded seven people. Israel responded shortly afterward by unleashing its fighter jets in a series of strikes into Lebanon’s south, reportedly killing at least four people and wounding dozens of others.
The Lebanon-Israel cross-border strikes come as Palestinians await an assault on the southern city of Rafah after the failure of ceasefire talks that ended in Egypt on Tuesday.
Also, there are lowered expectations about rate cuts in the US after the Federal Reserve signalled it was in no rush to start reversing its interest rate policy.
Prices drew some support from a monthly report on Tuesday from the Organisation of the Petroleum Exporting Countries (OPEC) that said global oil demand will rise by 2.25 million barrels per day in 2024 and by 1.85 million barrels per day in 2025.
The International Energy Agency (IEA), in contrast, expects weaker oil demand, growing by between 1.2 and 1.3 million barrels daily this year.
The IEA also expects comfortable supply levels, entirely sufficient to meet this moderately higher demand, citing stronger output from the Americas.
The US EIA, however, warned earlier this month that production growth in the US this year could be much weaker than it was last year. The EIA also pegged growth at zero for the year.
