By Ken Afor
As a result of a larger-than-anticipated build up in crude and gasoline stocks in the US, oil prices fell for a third day on Wednesday, assuaging supply issues.
At 04.05 GMT, Brent futures fell 30 cents, or 0.35 percent, to $85.52 a barrel, while in the US, to reach $83.07 per barrel, West Texas Intermediate crude fell 42 cents, or 0.50 percent.
After falling more than 2 percent in the previous session, both benchmarks have lost the majority of their early-week gains.
According to Wednesday’s data from the American Petroleum Institute and market sources, the amount of crude oil in storage increased by about 12.9 million barrels.
This was much higher than the 500,000 barrel gain that analysts predicted in a Reuters poll.
“Unlikely to help sentiment this morning are API inventory numbers…Lower refinery run rates due to maintenance likely contributed to this build,” according to ING analysts’ client note.
The data also revealed an increase in gasoline inventories of 3.6 million barrels, which contrasted sharply with the analysts’ predicted 800,000-barrel decline and fed concerns about slowing fuel demand in the U.S.
“Fuel prices may be closer to consumers’ pain threshold than inflation-adjusted prices might suggest. There are already signs that consumers have responded by cutting back on fuel consumption,” JP Morgan analysts said in a client note.
“In PADD 5, of which California is the biggest consumer, we estimate gasoline demand dropped 100,000 barrels per day between June and September, to a seven-month low of 1.46 million barrels per day,” they added.
The markets will be watching for additional inventory data hints from the U.S. Energy Information Administration (EIA) as data is scheduled for release at 1500 GMT later in the day.
Prices were under downward pressure elsewhere as market worries about the Middle East supply situation continued to subside.
“Crude oil extended losses on signs the impact of the Israel-Hamas war on the oil market will be limited,” ANZ analysts said in a client note.
ING analysts also said: “The risk premium continues to erode with the conflict largely contained to Israel and Hamas.”
Expectations from the U.S. EIA project that global oil inventories would decline even more in the second half of 2023.
According to the EIA in a monthly report, lower inventories, which are expected to keep the world’s oil supply below consumption, will likely lead to higher oil prices.
