Oil prices fell for a second day on Thursday after big increases in fuel inventories in the world’s top U.S. consumer. However, expectations of rising winter fuel demand and concerns about tighter supplies capped the decline.
Brent crude futures fell 8 cents to $76.08 a barrel by 0409 GMT. WTI crude futures fell 11 cents to $73.21.
Both indexes fell more than 1% on Wednesday, as a stronger dollar and a bigger-than-expected increase in U.S. fuel inventories weighed on prices.
The U.S. Energy Information Administration (EIA) said on Wednesday that gasoline inventories rose by 6.3 million barrels last week to 237.7 million barrels, despite analysts had expected a 1.5 million barrel increase.
Distillate inventories rose by 6.1 million bpd on the week to 128.9 million, compared with analysts’ expectations of a 600,000 bpd increase. Crude inventories, however, fell by 959,000 bpd on the week, compared with analysts’ expectations of a 184,000 bpd decline.
Rising U.S. fuel inventories helped spur some sales, but the decline was limited by the affect of the winter demand season in the northern hemisphere.
Oil demand in January is expected to rise by 1.4 million bpd on an annual basis to 101.4 million bpd, primarily due to increased use of heating fuels in the northern hemisphere.
Global oil demand is expected to remain strong through January, analysts say, driven by colder-than-normal winter conditions that are boosting heating fuel consumption and an earlier start to travel activity in China for the Lunar New Year holidays.
Despite falling prices, the market structure in Brent futures suggests traders are becoming increasingly concerned about tight supply at a time when demand is rising.
The premium for the front-month Brent contract over the six-month contract reached its highest level since August on Wednesday. The widening of this decline, where futures for on-time delivery are higher than those for later delivery, typically indicates a decrease in supply or an increase in demand.
Looking ahead, China’s demand trends, the incoming U.S. administration’s energy and trade policies, and stance on the Russia-Ukraine war will be key focuses, with traders likely to avoid taking large positions until Trump’s inauguration on Jan. 20.
