Oil fell after a US inventory report sent mixed signals, with fuel stockpiles dwindling while crude stockpiles swelled. US oil stockpiles rose 17.5 million in the last two weeks, the Energy Information Administration report on Wednesday showed.
Despite the bearish increase, West Texas Intermediate pared losses to trade near $77 after a drawdown in product inventories.
“If you have a decline in product inventories, that’s a stronger signal that there’s higher demand for gasoline, diesel, and jet fuel,” said Rob Thummel, a portfolio manager at Tortoise Capital Advisors. “Ultimately, that means refiners are going to buy more oil to produce refined products and that demand for oil ultimately will likely rise.”
The oil market has also been weighing differing views on supply and demand. The International Energy Agency said Tuesday that global oil markets won’t be as tight as expected this quarter, with production growth in the US and Brazil beating forecasts. That came after a more upbeat assessment from OPEC that highlighted robust growth trends and healthy fundamentals.
Oil fell to a three-month low last week after shedding all of the risk premium from the conflict between Israel and Hamas. A soft US inflation print on Tuesday spurred bets the Federal Reserve will start cutting interest rates by mid-2024, aiding the longer-term outlook, but prices have struggled for direction as concerns linger about rising supply and faltering consumption. US producer prices fell the most since April 2020.
Signs of market softness have continued along the curve. The front-month WTI spread flipped to contango — where near-term prices are below longer-dated ones — for the second time in a week, signaling concerns about scarce supplies are easing.
