Brent crude futures dropped 14 cents, or 0.2%, to $83.54 a barrel after rising 3 cents in the earlier session
Oil prices on Thursday dropped after a larger-than-expected build in U.S. crude stockpiles stoked concerns about slow demand, while signs that U.S. interest rates could remain higher added to pressure.
Brent crude futures dropped 14 cents, or 0.2%, to $83.54 a barrel by 0420 GMT, after rising 3 cents in the earlier session. U.S. West Texas Intermediate (WTI) crude futures were down 4 cents, or 0.1%, to $78.50 a barrel.
U.S. crude oil stockpiles rose while gasoline and distillate inventories dropped last week as refiners ran at below seasonal lows due to planned and unplanned outages, the Energy Information Administration (EIA) said on Wednesday.
Crude inventories increased for the fifth successive week, rising 4.2 million barrels to 447.2 million barrels in the week ended February 23, the EIA said.
Large stockpiles heightened investors’ concerns over a slow economy and lowered oil demand in the U.S., said Satoru Yoshida, a commodity analyst with Rakuten Securities.
The expectation of delayed U.S. rate cuts also weighed on the market sentiment as it could undermine oil demand, Yoshida added.
High borrowing costs typically reduce economic growth and oil demand.
Traders have already lowered expectations for U.S. interest rate cuts after a flurry of strong data, including hot consumer price index (CPI) and producer price index (PPI) readings. They expect an easing cycle to kick off in June, compared with the start of 2024 when bets were on March.
Market participants are now awating the U.S. personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, for more trading cues.
The index, to be released on Thursday, is expected to show prices rose 0.3% on a monthly basis in January.
The market also eyed the possible extension of voluntary oil output cuts from OPEC+, which has limited price declines for now.
With the demand outlook remaining uncertain, we think OPEC will extend the current supply agreement to the end of Q2, ANZ analysts Daniel Hynes and Soni Kumari said in a client note.
