As US inventories rise, demand worries cause oil prices to decline

21 Dec 2023 , 10:30 AM

On Thursday, oil prices dropped as worries about weak demand in the wake of an unexpected increase in U.S. crude inventory overcame anxieties about interruptions to global trade and geopolitical unrest in the Middle East.

U.S. West Texas Intermediate crude was down 55 cents, or 0.7%, to $73.67 per barrel, while Brent crude futures had dropped 65 cents, or 0.8%, to $79.05 a barrel.

Wednesday saw a little increase in both benchmarks as investors became more concerned about potential interruptions to trade due to big marine carriers choosing not to travel the Red Sea route, as longer trips result in higher transportation and insurance expenses.

In contrast to experts’ predictions in a Reuters poll for a 2.3 million barrel decline, the U.S. Energy Information Administration (EIA) said on Wednesday that U.S. oil stocks increased by 2.9 million barrels to 443.7 million barrels in the week ending December 15.

The U.S. oil production reached a record 13.3 million barrels per day (bpd) last week, according to the EIA, surpassing the previous all-time high of 13.2 million bpd.

Roughly 12% of global shipping traffic travels through the Suez Canal and the Red Sea. Because the majority of Middle Eastern crude is exported via the Strait of Hormuz, analysts noted that the impact on the oil supply has been little thus far.

The Treasury Department stated that modifications to the compliance regime made on Wednesday will make it more difficult for Russian exporters to get around the price ceiling imposed by the U.S.-led coalition on Russian oil transported by sea.

For feedback and suggestions, write to us at [e-mail]