- Brent crude futures fell 0.36% to $83.35 per barrel, while West Texas Intermediate crude fell to $78.59.
- US crude inventories saw a significant increase of 8.43 million barrels.
- OPEC+ is considering extending production cuts, which could affect global oil markets.
Oil prices declined in Asia on Wednesday, affected by several key factors that kept investors and market watchers on alert. Initially, the market received a boost from expectations of extended production cuts by OPEC+. However, this momentum was short-lived, as the possibility of a postponement of the US interest rate cutting cycle, coupled with a sudden rise in US crude oil inventories, put downward pressure on prices.
Comments from Federal Reserve Governor Michael Bowman added to cautious market sentiment. Bowman pointed to the reluctance to lower US interest rates in the near term, especially in light of the potential risks to inflation. This stance indicates a more conservative approach to monetary policy, which could have broad implications for commodity markets, including oil.
Crude oil inventories rose by 8.43 million and gasoline decreased by 3.27 million
The American Petroleum Institute's latest report, which revealed a significant increase in US crude oil inventories of 8.43 million barrels for the week ending February 23, is in stark contrast to the optimism that prevailed in the market earlier. In addition, gasoline inventories decreased by 3.27 million barrels, and distillate inventories decreased slightly by 523 thousand barrels. These inventory shifts reflect ongoing market adjustments, further complicating the outlook for oil prices.
Despite these pressures, the market rose the previous day, driven by reports that OPEC+, led by Russia and other allies, may extend voluntary production cuts into the second quarter. This potential extension, which some OPEC+ sources consider “likely”, with discussions about extending the cuts until the end of 2024, underscores the complex interplay of supply dynamics affecting global oil prices.
China's record consumption reaches 16.03 million barrels per day
The global oil demand landscape is witnessing significant changes. India should overtake China as the main driver of demand by 2030. This shift is due in part to China's record oil consumption last year. It reached an all-time high of 16.03 million barrels per day. This increase has fueled the country's strategic imports of cheap crude oil during falling prices. There has also been a rebound in domestic travel following coronavirus restrictions.
As the market overcomes these challenges, OPEC+ decisions on production cuts are crucial. These decisions will shape the future course of oil prices. As US inventories fluctuate and global demand patterns change, stakeholders are watching closely. They are monitoring these developments to gauge their impact on the energy sector.
