Oil futures experienced a slight downturn early Wednesday, influenced by industry data revealing an unexpected uptick in U.S. crude inventories and a larger-than-anticipated rise in gasoline stocks.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude for July delivery dipped by 16 cents, equivalent to 0.2%, settling at $73.09 per barrel. Meanwhile, August Brent crude, the global benchmark, recorded a 12-cent decline, or 0.2%, reaching $77.40 per barrel on ICE Futures Europe.
The American Petroleum Institute (API), a key industry group, disclosed late Tuesday a notable increase of 4.05 million barrels in U.S. crude inventories during the previous week, as reported by a source familiar with the data. Additionally, gasoline stocks saw a surge of 4.03 million barrels, while distillate inventories witnessed a rise of 1.78 million barrels.
This unexpected rise in inventories signaled potential oversupply concerns, leading to downward pressure on oil prices. Investors closely monitor such data releases as they provide insights into the balance between supply and demand in the oil market.
Official data from the Energy Information Administration (EIA) was anticipated Wednesday morning, with analysts surveyed by S&P Global Commodity Insights projecting a decline of 2.8 million barrels in crude inventories, along with a rise of 600,000 barrels in gasoline stocks and 700,000 barrels in distillates. The market eagerly awaited these figures to confirm or challenge the API’s report and to gauge the overall health of the oil market.
Tuesday’s closure marked the lowest point for WTI and Brent since early February, further extending losses incurred following OPEC+’s announcement over the weekend. The group revealed plans to gradually unwind voluntary production cuts totaling 2.2 million barrels per day over 12 months from October onwards, while extending a program of group cuts amounting to 3.66 million barrels per day through the end of 2025.
The decision by OPEC+ to ease production cuts raised concerns among investors about the potential for increased supply in the market, which could outweigh demand and lead to downward pressure on prices. This anticipation of future oversupply contributed to the ongoing decline in oil prices.
Despite the market’s disappointment over OPEC+’s decision, commodity strategists at ING expressed a belief that oil’s recent decline may have been excessive. They emphasized that while the gradual unwinding of cuts is slated to commence in October, the balance sheet indicates a tightening in the oil market throughout the third quarter. Consequently, they suggested that the extent of the selloff at the front end of the forward curve may have been exaggerated.
Overall, the oil market remained sensitive to supply-demand dynamics, geopolitical factors, and global economic conditions, with investors closely monitoring developments for clues about future price movements.