Oil prices tumble as US stockpiles swell, stoking demand worries

29 Feb 2024 , 11:27 AM

Early on Thursday, oil prices decreased as concerns about slowing demand were heightened by a bigger-than-expected increase in US crude stocks. Additionally, indications that US interest rates may stay high for an extended period of time contributed to the pressure.

Brent crude futures had dropped 22 cents, or 0.3%, to $83.46 per barrel. Crude oil futures for the United States were down 30 cents, or 0.4%, to $78.24 barrel.

The Energy Information Administration reported on Wednesday that last week saw refiners operate at below seasonal lows owing to scheduled and unforeseen outages, which resulted in a rise in U.S. crude oil stockpiles and a decrease in gasoline and distillate inventories.

In contrast to experts’ predictions in a Reuters poll for a 2.7 million-barrel increase, crude stocks increased for the fifth straight week in the week that ended on February 23, rising by 4.2 million barrels to 447.2 million barrels, according to the EIA.

High borrowing rates usually mean lower oil demand and slower economic growth.

Following a plethora of positive data points, such as high readings for the producer and consumer price indices, traders have already lowered their expectations for U.S. interest rate reductions. 

In contrast to the beginning of 2024, when wagers were placed on March, they anticipate an easing cycle to begin in June. 

For additional trading cues, market players are currently awaiting the release of the Fed’s favourite inflation indicator, the U.S. personal consumption expenditures price index.

Prices are predicted to have increased by 0.3% on a monthly basis in January, according to the index, which will be revealed on Thursday. 

However, according to Yoshida of Rakuten, the Middle East conflict is anticipated to maintain a floor beneath oil prices. 

The stakes in discussions for a truce in Gaza have increased as Hamas called on Palestinians to march to Jerusalem’s Al-Aqsa Mosque at the beginning of Ramadan next month. U.S. President Joe Biden believes that the truce will be in place by then.

However, the likelihood of a truce has been downplayed by both Israel and Hamas, and the mediators in Qatar have stated that the most difficult issues remain unaddressed. 

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