Significant weekly gains in gasoline and distillate stocks on Thursday effectively ended an earlier rise in oil prices, overshadowing a larger-than-anticipated decline in crude inventories. After climbing above $1 earlier, Brent crude sank by $1.57, or 2%, to $79.01 a barrel at 11:23 a.m. EDT. At $73.57, U.S. West Texas Intermediate oil futures dropped by $1.47, or 2%.
According to statistics from the US Energy Information Administration, low fuel demand and significant stockpile growth affected prices.
At 237 million barrels, gasoline stockpiles increased by 10.9 million barrels, marking the largest weekly increase in over thirty years. To reach 125.9 million barrels, distillate stockpiles increased by 10.1 million barrels last week. According to EIA statistics, the supply of distillate products, a measure of demand, dropped to its lowest point since 1999.
According to Bob Yawger, director of energy futures at Mizuho, while crude stockpiles decreased by 5.5 million barrels over the week, a large portion of the decline may be attributed to shipping difficulties in the Red Sea.
“The situation in the Red Sea has forced a lot of refiners and buyers of crude oil to go to the United States rather than sail their boat around the Horn of Africa,” Yawger stated.
After Yemen’s Houthis, whom Iran supports, claimed on Wednesday that they had “targeted” a container ship en route to Israel, shipping fears persisted. The extremist organization fired two anti-ship ballistic missiles in the southern Red Sea the day before, according to U.S. Central Command.
Earlier in the day, prices dropped due to positive economic news. In December, business activity in the eurozone decreased. The increase in German inflation may have given the European Central Bank a reason to maintain stable interest rates for the foreseeable future.
For the first time in the previous five days, both oil benchmarks finished the day higher on Wednesday, rising almost 3%. The American Petroleum Institute’s report showed that crude stockpiles dropped by 7.4 million barrels—double the anticipated drawdown—and supported oil.
At a ceremony in Iran on Wednesday honoring Commander Qassem Soleimani, who was killed by an American drone in 2020, two explosions left about 100 people dead and several others injured. Iran promises retaliation.
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