Oil prices reversed direction on Thursday, slipping from their highest levels in more than a month after U.S. fuel inventories rose against falling demand.
Brent crude futures, the global oil benchmark, dropped 63 cents, or 0.8%, to $80.17 a barrel at 0727 GMT. U.S. West Texas Intermediate (WTI) crude futures fell 58 cents, or 0.8%, to $77.27 a barrel.
U.S. crude oil stockpiles declined last week as gasoline inventories jumped more than 10 million barrels, the largest weekly build since April 2020, as supplies backed up at refineries on weakened fuel demand.
“Implied product demand in particular for gasoline drained, an indication that the public were being cautious about travel amid soaring cases of the Omicron variant,” Caroline Bain, chief commodities economist at Capital Economics said to note.
“These fears will probably hang around for another couple of weeks.”
The United States recorded nearly 1 million cases of COVID-19 on Monday, a global record, as the spread of the Omicron variant showed little sign of abating, and heavy snow also added to travel disruptions.
Minutes from a U.S. Federal Reserve meeting that indicated policymakers might raise rates faster than markets had expected also weighed on riskier assets such as oil. [MKTS/GLOB]
Wednesday, Brent and WTI futures rose to their strongest since late November after OPEC+ decided to increase supplies, easing fears of a major surplus in the first quarter of 2024.
OPEC+, which includes members of the Organization of the Petroleum Exporting Countries, Russia and other producers, had agreed on Tuesday to add another 400,000 barrels per day (bpd) of supply at a time in February, as it has every month since August.
“Our reference case now assumes the alliance fully unwinds the remaining 2.96 million bpd of oil production cuts by September 2022,” JP Morgan analysts said in a note.
“Given signs of demand holding up against the Omicron variant, low inventories and increasing market vulnerability to supply disruptions, we see more OPEC+ barrels being needed,” the bank said. JP Morgan expected Brent prices to average $88 a barrel in 2022, up from $70 in last year.
Meanwhile, TC Energy’s Keystone oil pipeline with 590,000-bpd capacity started operations again on Wednesday following a 1-day shutdown, the company said, as parts of western Canada struggled with freezing winter weather.
