Oil prices experienced an uptick, although the surge faced resistance following an unforeseen increase in U.S. crude inventories, reigniting concerns about a potential oversupply in the face of dwindling demand.
As of 14:30 ET (19:30 GMT), U.S. crude futures settled 0.4% higher at $74.22 per barrel, while the Brent contract saw a 0.59% climb to $79.70 per barrel.
Surprise Build in U.S. Crude Inventories:
In a surprising turn of events, U.S. crude inventories witnessed an unexpected surge of approximately 2.9 million barrels for the week ending December 8. This defied earlier predictions of a mere 2.3 million barrel draw. Gasoline inventories, a byproduct of crude refining, rose by about 2.7 million barrels, surpassing the anticipated 1.2 million barrel build. Additionally, distillate stockpiles increased by 1.5 million barrels, exceeding expectations of a 496,000 barrel rise.
The Energy Information Administration’s report highlighting a record U.S. crude oil production of 13.3 million barrels per day, a weekly increase of 200,000 barrels, contributed to concerns of a potential supply glut.
Greece Advises Tankers to Steer Clear of Yemeni Waters:
Amid ongoing geopolitical tensions, Greece issued advice to commercial vessels to avoid Yemeni waters due to escalating risks. The Iran-aligned Yemeni Houthi militant group’s attacks on ships in the Red Sea have fueled concerns about potential disruptions to oil supply routes. With approximately 12% of global shipping traffic passing through the Suez Canal, the situation adds an additional layer of uncertainty to oil markets.
In response to these concerns, the United States has established a multinational naval task force to safeguard commerce in the region. However, the Houthi group remains defiant, pledging to persist with their attacks in support of Palestinians in Gaza.
European Inflation Cools:
Wednesday’s market dynamics were further influenced by data indicating a greater-than-expected decline in inflation in Germany, particularly in producer prices. Concurrently, British inflation experienced a notable plunge in November, reaching its lowest rate in over two years.
The cooling inflation trends in Europe have heightened expectations that both the European Central Bank and the Bank of England will initiate interest rate cuts in early 2024. Such moves are anticipated to stimulate economic activity and, subsequently, drive up demand for crude oil.