NEW YORK: Oil prices fell about 1 percent on Thursday as US crude inventories swelled to their highest in months, while the prospect of the Federal Reserve continuing with an aggressive rate hike path rattled sparked fears about weakening fuel demand.
Brent crude futures slipped 86 cents to $84.23 a barrel by 11:57 a.m. ET (1657 GMT), while US West Texas Intermediate crude futures fell 87 cents to $77.60 a barrel. Both benchmarks have gained more than 5 percent so far this week.
“Relentlessly rising US commercial inventories and potentially entrenched inflation limit any immediate upside potential,” said PVM analyst Tamas Varga, adding that recovering Chinese demand and falling inflation were set to support oil prices in the second half of the year.
Crude oil stocks in the US rose last week to 455.1 million barrels, their highest since June 2021, boosted by growing production, the Energy Information Administration said. Gasoline and distillate inventories also rose last week, the EIA said, during unseasonably mild winter months.
US Federal Reserve officials said more interest rate rises are on the cards as the bank presses on with its efforts to cool inflation, sending bearish signals across risk assets like oil and equities.
The prospect of stronger demand from China provided some support to oil prices, as the world’s second largest oil consumer ended more than three years of stringent zero-COVID policy.
“We expect Chinese oil consumption to increase by around 1.0 million barrels a day this year, with strong growth emerging as early as late in Q1,” analysts from ANZ bank wrote in a note.
“Overall, this should push global demand up by 2.1 million barrels a day in 2023.”
BP Azerbaijan declared force majeure on Azeri crude shipments from the Turkish port of Ceyhan on Feb. 7, after a massive earthquake struck Turkey and Syria early on Monday. Azeri oil continues to flow there via pipeline, BP Azerbaijan said on Thursday.
Brent’s front-month loading contract rose to a $3-a-barrel premium over contracts six months out, a market structure called backwardation, which indicates traders seeing tight current supply.
A weaker US dollar, which typically trades inversely with oil, also helped limit losses in crude prices. The dollar index fell 0.7 percent to 102.74.