Oil prices experienced a significant decline of more than 1.5%, primarily due to a larger-than-expected increase in US crude inventories and record-breaking production levels in the world’s largest oil producer.
Concerns about declining demand in Asia also contributed to the price drop.
The Brent crude futures settled by $1.29, marking a 1.6% decrease to $81.18 per barrel. Similarly, US West Texas Intermediate (WTI) crude dropped by $1.60, or 2%, closing at $76.66 per barrel.
One noteworthy development was that WTI’s front-month contract fell below the second-month contract, indicating a contango situation.
Additionally, prices for oil futures six months ahead appeared poised to surpass those of the front-month contracts.
According to data from the US Energy Information Administration (EIA), US crude oil stocks surged by 3.6 million barrels in the past week, reaching 421.9 million.
This increase far exceeded analysts’ expectations, who had predicted a rise of only 1.8 million barrels.
The EIA data also revealed that US crude oil production remained at a record high of 13.2 million barrels per day, a level it had previously reached in October.
John Kilduff, a partner at Again Capital LLC in New York, commented on this situation, stating that US supply activity challenges the oil market and concerns OPEC+.
He expressed skepticism about Saudi Arabia’s ability to reduce output further to boost prices.
Oil Demand Rises as Russia and Saudi Arabia Extend Cuts
Top oil exporters Saudi Arabia and Russia, both members of OPEC+ (the Organization of the Petroleum Exporting Countries and its allies), had previously announced their commitment to continue voluntary oil output cuts until the end of the year.
While US gasoline stocks indicated strong demand with an unexpected drawdown of 1.5 million barrels in the past week, diesel inventories declined by 1.4 million barrels more than anticipated.
Despite concerns about slowing economic growth in several major countries, OPEC and the International Energy Agency raised their annual oil demand growth forecasts.
China experienced a decrease in oil refinery throughput in October due to weakened industrial fuel demand and narrower refining margins.
However, its economic activity showed improvement in the same month, with increased industrial output and better-than-expected retail sales growth.
Japan’s economy contracted in the third quarter of the year due to soft consumption and exports, ending two consecutive quarters of expansion. Additionally, US retail sales declined in October, marking the first seven-month drop.
European Union diplomats clarified that the European Commission’s proposal to tighten the implementation of a price cap on Russian crude oil does not target Russian oil tankers.
Previously, there were reports that Denmark would inspect and potentially block Russian tankers in its waters as part of the EU’s efforts to enforce a $60 per barrel price cap on Moscow’s crude oil.