By Ken Afor
Oil prices fell on Thursday as concerns over low demand following a surprise U.S. crude inventory build outweighed jitters over global trade disruptions due to tensions in the Middle East.
At 07:53 GMT, Brent crude futures experienced a slight decline of 3 cents, settling at $79.67 per barrel.
Similarly, U.S. West Texas Intermediate (WTI) crude also saw a decrease of 6 cents, reaching $74.16 per barrel.
The two benchmarks concluded the trading day on Wednesday with gains, marking the third consecutive session of upward movement. Concerns among investors arose due to trade disruptions caused by prominent maritime carriers opting to avoid the Red Sea route.
This decision has led to longer voyages, resulting in escalated transportation and insurance expenses.
“Market focus returned to sluggish global demand as the impact on the Red Sea is seen to be limited on oil as long as it does not spill over into the Strait of Hormuz,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.
“A build in U.S. crude stocks and record domestic oil production also added to pressure,” he said.
According to the U.S. Energy Information Administration (EIA), crude oil inventories in the United States increased by 2.9 million barrels during the week ending on December 15th, reaching a total of 443.7 million barrels. This figure contradicts the predictions of analysts in a Reuters poll, who anticipated a decrease of 2.3 million barrels.
The EIA reported that crude oil production in the United States reached a new milestone, with output reaching a record-breaking 13.3 million barrels per day (bpd) last week. This figure surpasses the previous all-time high of 13.2 million bpd.
Approximately 12% of global maritime transportation traverses the Red Sea and the Suez Canal.
Nevertheless, experts have noted that the influence on oil provision has remained restricted thus far, as the majority of crude oil from the Middle East is shipped through the Strait of Hormuz.
“Since there will be no additional production cuts by OPEC+ this year, oil prices will likely remain in range through the end of the year, with focus on key economic statistics and the U.S. dollar’s reaction to them,” said Naohiro Niimura, a partner at Market Risk Advisory, a research and consulting firm.
He forecasted that the WTI would fluctuate within the range of $70 to $75 throughout this month.
The Treasury Department announced modifications to the compliance regime of the U.S.-led coalition, which has imposed a price cap on seaborne Russian oil. These changes aim to increase the difficulty for Russian exporters to circumvent the cap.
