Oil prices continued declining on Thursday, weighed down by concerns about slowed demand due to a larger-than-expected rise in U.S. crude oil inventories and signs that U.S. interest rates may remain high.
Brent crude futures were down 14 cents, or 0.2%, at $83.54 a barrel by 04:20 GMT. WTI crude oil futures fell 4 cents, or 0.1%, to $78.50 a barrel.
U.S. crude oil inventories rose for the fifth consecutive week. However, U.S. crude oil inventories may have increased as refineries operate below seasonal lows due to planned and unplanned outages.
EIA said crude oil inventories rose by 4.2 million barrels to 447.2 million barrels in the week ended Feb. 23, compared to analysts’ expectations for a 2.7 million barrel increase. In contrast to crude, gasoline and distillate inventories fell last week, the Energy Information Administration (EIA) said Wednesday.
The increase in inventories increased investors’ concerns about the slow economy and declining oil demand in the United States. The expectation that US interest rate cuts will be postponed also weighed on market sentiment as it could weaken oil demand. High borrowing costs reduce economic growth and oil demand.
Investors’ expectations for a U.S. rate cut have cooled following a series of strong data, including hot consumer price index and producer price index readings. An easing cycle is expected to begin in June compared to March 2024.
Market participants are now waiting for the U.S. personal consumption expenditures price index, the Federal Reserve’s preferred measure of inflation, for further clues.
The index, which will be published on Thursday, expects prices to increase by 0.3% every month in January.
The market, which is experiencing limited price declines for now, is also waiting for a possible extension of OPEC+’s voluntary oil production cuts. While the demand outlook remains uncertain, OPEC is expected to extend its current supply agreement until the end of the second quarter.
Analysts predict that the price outlook remains unchanged and that 2024 annual average prices will be $86 per barrel for Brent and $81 per barrel for WTI.
Conflicts in the Middle East also provide a basis for oil prices.
Hamas on Wednesday called on Palestinians to march to Al-Aqsa Mosque in Jerusalem at the beginning of Ramadan next month, increasing excitement about ceasefire talks in Gaza that Biden hopes will happen by then.
However, while both Israel and Hamas downplay the possibility of a ceasefire, Qatari mediators have said the most contentious issues remain unresolved.
