Oil prices experienced a downturn on Thursday, extending losses from the previous session. The decline was fueled by concerns stemming from a significant increase in U.S. crude stockpiles, exacerbating worries about sluggish demand. Additionally, apprehensions surrounding the likelihood of sustained elevated interest rates in the United States added to the pressure on oil markets.
By 6:14 GMT, Brent crude futures declined 0.05 percent to $83.64 per barrel. Meanwhile, West Texas Intermediate crude futures were down 0.04 percent, to $78.51 a barrel.
U.S. crude stockpiles
According to the Energy Information Administration (EIA), U.S. crude oil stockpiles witnessed a notable uptick for the fifth consecutive week, pushing oil prices downwards. However, gasoline and distillate inventories declined last week because refiners ran at below-seasonal lows due to planned and unplanned outages.
The increase in crude stocks, surpassing analysts’ expectations, amounted to 4.2 million barrels. This brings the total to 447.2 million barrels by the end of the week on February 23. This larger than expected surge has intensified concerns among investors regarding the pace of economic recovery and its implications for oil demand and prices.
Interest rate uncertainty
The anticipation of prolonged high interest rates in the U.S. has further dampened market sentiment. Traders have tempered expectations for imminent rate cuts following robust economic data, including elevated consumer and producer price indices. With the possibility of an easing cycle pushed back to June, compared to previous projections for March, investors are bracing for continued high borrowing costs that could potentially stifle economic growth and oil consumption.
The market now awaits the U.S. personal consumption expenditures price index for more insights into rate cuts and their impact on oil prices. The index, due today, could show a 0.3 percent increase in prices on a monthly basis in January.
Read: Gold prices rise marginally as traders eye key U.S. inflation data
Geopolitical factors
While geopolitical tensions in the Middle East have previously supported oil prices, uncertainty persists regarding the impact on global supply dynamics. Meanwhile, analysts anticipate that OPEC+ may extend voluntary output cuts in response to the evolving demand landscape. This may provide some support to prices amidst ongoing uncertainty.
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