- Benchmark Brent has collapsed by about a fifth this quarter
- API reports US crude, gasoline inventories fell last week
Oil steadied after a plunge to the lowest prices in more than a year, while an unexpected increase in US crude stockpiles added to concerns about an oversupply.
West Texas Intermediate rebounded more than 2% to around $67 a barrel following Tuesday’s 4.3% plunge. Government figures on Wednesday showed an unexpected 833,000-barrel increase in US crude stockpiles. An industry group had projected that US oil inventories declined 2.79 million barrels, and Bloomberg users had forecast a 700,000-barrel drop.
Crude has sunk by almost a fifth this quarter on concerns that slowing growth in the US and China, the leading consumers, will hurt demand at a time of robust and expanding supplies. Market metrics — including the shape of the futures curve — indicate that conditions are quickly becoming far less tight, with pockets further out making a brief foray into a bearish contango structure.
The prospect that China’s economy would grow less than projections of around 5%, as well as the country’s lower-than-expected crude demand, continues to cause market watchers to adjust their forecasts and weigh on oil prices, especially global benchmark Brent, said Brian Kessens, a managing director at Tortoise Capital Advisors LLC.
“OPEC lowered their estimates for global demand for this year, largely based on weak Chinese demand,” Kessens said.
Futures had rallied as much as 2.8% earlier in the session, but pared gains after US inflation unexpectedly picked up in August, undercutting the chances of an outsize Federal Reserve interest-rate cut next week. The US inventory data then sent crude into little-changed territory and even briefly negative.
US gasoline futures also pared gains — and even touched negative territory — after the Energy Information Administration reported a 2.31 million-barrel increase in inventories. Gasoline futures had slumped to the lowest since 2021 on Tuesday.
Oil’s retreat has already seen OPEC+ postpone an output hike, stoking investor concerns that the extra barrels could be still be brought to the market closer to 2025. The International Energy Agency — which will issue a revised monthly outlook later this week — said in August the market risked higher inventories next year even if the cartel canceled the output increase.
“We’ve got closer to what looks like a high-conviction surplus for next year,” Citigroup Inc. head of commodities research Max Layton said in an interview with Bloomberg television. “The market has just simply got closer to D-Day really.”
On the technical side, Brent’s tumble on Tuesday pushed its 14-day Relative Strength Index — a measure of the speed and magnitude of an asset’s move — briefly below 30, a level seen by some traders as potentially signaling a near-term rebound.
Traders are also tracking Hurricane Francine, which is expected to make landfall in Louisiana later Wednesday. With Chevron Corp. and Shell Plc among companies taking measures, federal officials said the total amount of shut-in oil represented nearly a quarter of crude production in the Gulf of Mexico. In addition, eight refineries may lie in the system’s path.
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Written by: Antonia Mufarech and Alex Longley — With assistance from Yongchang Chin @Bloomberg
The post “Oil Steadies While US Stockpile Gain Adds to Oversupply Worries” first appeared on Bloomberg