Oil prices experienced a continued descent on Wednesday, reaching a five-month low, despite the Energy Information Administration (EIA) releasing data indicating a 4.6 million-barrel decrease in crude inventories in the United States last week. The descent in oil prices was exacerbated by a simultaneous revelation of a substantial increase in gasoline stockpiles, rising by over 5 million barrels, far surpassing the estimated build of 1.3 million barrels. Analysts attribute this unexpected surge in fuel inventory, typical for this time of year, to underlying weaknesses in demand.
West Texas Intermediate (WTI), symbolized as CL=F, witnessed a midday plummet of approximately 4% on Wednesday, slipping below the $70 per barrel threshold. Simultaneously, Brent crude (BZ=F), the globally recognized benchmark, experienced a 3.6% decline, dropping below the $75 per barrel mark.
Oil prices had already initiated a lower trajectory earlier in the day, reflecting concerns over oversupply and diminished demand. These concerns were further compounded by Moody’s warning on Tuesday, downgrading China’s credit rating amidst mounting apprehensions about the country’s economic growth.
Dennis Kissler, Senior Vice President at BOK Financial’s trading division, remarked, “Economic numbers from China are showing a further slowdown as Asian refinery run rates continue to drop with Saudi cutting cash crude prices for next month to China.” He underscored that, seasonally, oil prices typically decline in late December.
The downward trajectory of oil prices occurred despite the efforts of OPEC+ to curtail output and deeper reductions announced just the previous week. OPEC+ collectively consented to additional output curbs of 1 million barrels per day in a bid to bolster prices. This move coincided with an extension of Saudi Arabia’s unilateral reduction of 1 million barrels per day.
However, the official press release following the OPEC+ meeting conspicuously omitted any mention of these additional cuts, leading traders to speculate that these reductions were voluntary in nature, with each country announcing quotas individually. Since the decision by the oil producer alliance, both WTI and Brent have experienced a decline of approximately $5 each, constituting a roughly 6% reduction.
Moreover, on the domestic front, ADP employment data released on Wednesday showed a modest increase of 103,000 jobs in the United States last month, falling short of the anticipated 130,000. Furthermore, the previous month’s job additions were revised downward to 106,000, as opposed to the previously reported 113,000. This weaker performance in the U.S. job market suggests lower demand amid an economic slowdown, contributing to the prevailing bearish sentiment in the oil market.
Source: Yahoo Finance
