Oil continues to fall on a massive stockpile

After an industry estimate indicated a significant gain in US stockpiles and investors evaluated the future for US monetary policy in light of data showing still-high inflation, the price of oil continued to fall.

In Asian trade, West Texas Intermediate fell below US$79 per barrel after finishing more than 1% lower on Tuesday.

According to persons familiar with the numbers, the industry-funded American Petroleum Institute claimed that US commercial crude stockpiles increased by 10,5 million barrels last week. The report also showed a rise in gasoline and distillate stocks.

In order to slow the rate of price increases, investors are attempting to predict how much higher the US Federal Reserve will raise interest rates.

Consumer prices rose 0,5 percent in January, the most in three months, and the annual inflation rate came in at a higher-than-expected 6,4 percent, according to official figures on Tuesday.

Oil has struggled this week despite Russia’s plan to reduce supplies as sanctions bite amid the war in Ukraine, and optimism about the outlook for consumption in China with activity picking up. A US plan for a mandated sale of barrels from the Strategic Petroleum Reserve has weighed on prices, which have also been burdened by expectations for higher US interest rates.

“The direction of travel in the near term looks more south than north,” said Vishnu Varathan, head of Asia economics and strategy at Mizuho Bank Ltd., citing factors including more elevated interest-rate expectations.

In addition, given the supply-inventory build, there could be a softening bias, he said. US crude stockpiles have swelled this year to hit the highest level since mid-2021 after expanding for seven straight weeks. Following the API estimate, government data on last week’s movements will be released later Wednesday.

Source | Bloomberg

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