Oil longs scratch head as U.S. crude stocks hit 20-month highs
By Barani Krishnan
Investing.com — Oil bulls were in search of their mojo again on Wednesday as crude prices tumbled almost 3% from a sixth straight weekly build in U.S. stockpiles and OPEC+’s decision to leave production levels unchanged on the notion that Chinese demand would pick up.
New York-traded West Texas Intermediate, or WTI, crude for March settled down $2.46, or 3.1%, at $76.41 per barrel. The session low was $76.06.
London-traded Brent crude for March delivery settled down $2.62, or 3%,at $82.84, after an intraday bottom at $82.39.
U.S. crude inventories rose by 4.14M barrels during the week ended Jan. 27, the Energy Information Administration, or EIA, said in its Weekly Petroleum Status Report.
The build was above the 0.376M forecast by industry analysts and compared with the rise of 0.533M reported by the EIA during the previous week to Jan 20.
The EIA has reported a total crude build of 34.5 million barrels over the past six weeks.
At a current standing of 824.3M barrels, crude stockpiles were at their highest since June 2021, said the EIA, which serves as the statistical arm of the U.S. Energy Department.
OPEC+, at its virtual monthly meeting, decided to maintain output targets agreed upon in December, Iraq’s Oil Ministry said in a curt one-line headline carried by Reuters.
«From my understanding, it was one of the shortest OPEC+ meetings ever, lasting about 15 minutes at the most,» said John Kilduff, partner at New York energy hedge fund Again Capital. «It’s probably best for the Saudis and Russians to have these meetings over Zoom rather than in person to control the narrative that flows out to the media. OPEC officials who shouldn’t be talking to the press can’t resist their chance for 15 seconds of fame when a microphone is thrust to their mouth.»
OPEC+, which groups the 13-member Saudi-led OPEC, or Organization of the Petroleum Exporting Countries, with 10 independent oil producers, including Russia.
The path ahead for those long on oil is challenging at the least given the premature state of China’s evolution from its coronavirus crisis, said Craig Erlam, analyst at online trading platform OANDA.
«Focus will remain on demand and whether the global economy can achieve a more modest slowdown than feared in a very challenging environment,» Erlam said in the oil subsection of his daily note on market risks.
«The Chinese COVID transition also remains key with early data suggesting it’s been quite smooth so far and the recovery could be stronger than expected,» Erlam wrote. «That said, the Caixin manufacturing PMI overnight suggested not all firms share that optimism, which could complicate things over the coming months. A strong rebound will obviously be a significant upside risk for crude prices which were weighed on last year during outbreaks and restrictions.»