Crude oil futures reacted very little to the larger-than-expected build in US inventories. Energy commodities have plummeted over the past month despite various bullish signals, from geopolitical concerns to production cuts. Oil prices are on track to erase all of their gains since the end of June. Can crude stay above $70 heading into 2024?
January West Texas Intermediate (WTI) crude oil futures plummeted $1.73, or 2.39%, to $70.66 per barrel at 14:45 GMT on Wednesday on the New York Mercantile Exchange. WTI prices are poised for a weekly loss of more than 9% and are down more than 12% year-to-date.
Brent, the international benchmark for oil prices, slipped below $76. February Brent crude futures declined $1.72, or 2.23%, to $75.48 a barrel on London’s ICE Futures exchange. Brent is down about 9% this week and has tumbled roughly 12% so far this year.
According to the US Energy Information Administration (EIA), domestic inventories of crude oil plummeted 4.632 million barrels for the week ending Dec. 1, down from the previous week’s build of 1.609 million barrels. This was also worse than the consensus estimate of a 1.354-million-barrel drawdown.
Gasoline supplies soared by 5.421 million barrels, distillate inventories rose by 1.267 million barrels, and heating oil stocks fell by 1.126 million barrels.
Storage levels at the Cushing, Oklahoma facility rose 1.829 million barrels.
Investors have largely dismissed the production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+. The cartel agreed to slash output by 2 voluntarily.2 million barrels per day (bpd). This is in addition to Saudi Arabia extending its voluntary production decrease of one million bpd and Russia’s reduction of exports by 300,000 bpd.
Despite an initial bump in prices, market analysts say that investors became skeptical that some key producers will comply with the OPEC mandate.
Traders have shifted their concerns from supply to demand, with the global financial markets anticipating that there will be an economic slowdown or recession in the US and across the globe.
Recent US reports show that the US economy is in the middle of a slowdown as durable goods orders and factory orders have plummeted. The services sector has been stagnant. The US labor market is showing signs of easing.
The Federal Reserve Bank of Atlanta’s GDPNow Model estimate has been slashed to 1.2% for the fourth quarter.
In other energy commodities, January natural gas futures dipped $0.01, or 0.37%, to $2.70 per million British thermal units (Btu). January gasoline futures fell $0.0539, or 2.55%, to $2.0557 per gallon. January heating oil futures tumbled $0.0473, or 1.79%, to $2.5938 a gallon.