London — Oil prices dipped in U.S. trading hours on Thursday after the country’s oil inventories hit their highest in months and on signs that the Federal Reserve could keep raising interest rates.
Brent crude futures slipped 95 cents to $84.14 a barrel by 1447 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell 90 cents to $77.57 a barrel. Both benchmarks have gained more than 5% so far this week.
“Relentlessly rising U.S. commercial inventories and potentially entrenched inflation limit any immediate upside potential,” said PVM analyst Tamas Varga.
He said recovering Chinese demand and falling inflation were set to support oil prices in the second half of the year.
Crude oil stocks in the United States rose last week to their highest since June 2021, helped by higher production, the Energy Information Administration said.
U.S. gasoline and distillate inventories also rose last week.
U.S. Federal Reserve officials said more interest rate rises are on the cards as the bank presses on with its efforts to cool inflation, sending bearish signals across risk assets like oil and equities. GLOB/MKTS
But the prospect of stronger demand from China provided some support to oil prices, as the world’s second largest oil consumer ended more than three years of stringent zero-COVID policy.
“We expect Chinese oil consumption to increase by around 1.0 million barrels a day this year, with strong growth emerging as early as late in Q1,” analysts from ANZ bank wrote in a note.
“Overall, this should push global demand up by 2.1 million barrels a day in 2023.”
BP Azerbaijan declared force majeure on Azeri crude shipments from the Turkish port of Ceyhan on Feb. 7, after a massive earthquake struck Turkey and Syria early on Monday. Azeri oil continues to flow there via pipeline, BP Azerbaijan said on Thursday.
Brent’s front-month loading contract rose to a $3-a-barrel premium over contracts six months out, a market structure called backwardation, which indicates traders seeing tight current supply.
*Shadia Nasralla, Muyu Xu; Editing: Bernadette Baum, Jason Neely, Arun Koyyur & Jane Merriman – Reuters
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