Oil settles lower on massive US fuel inventory builds

NEW YORK: Oil settled lower on Thursday (Jan 4) in a choppy see-saw session, as massive weekly petrol and distillate stock builds overshadowed a larger-than-expected crude stock draw.

Brent crude settled down 66 cents, or 0.8%, to US$77.59 (RM359.82). During the session it both rose and fell over US$1. US West Texas Intermediate crude futures settled down 51 cents, or 0.7%, to US$72.19 (RM334.78).

Low fuel demand and large inventory increases in data from the US Energy Information Administration (EIA) weighed on prices.

Petrol stocks rose by 10.9 million barrels to 237 million barrels, their highest week-on-week rise in more than 30 years.

Distillate stocks rose last week by 10.1 million barrels to 125.9 million barrels. Distillate product supplied, a proxy for demand, fell to its lowest level since 1999, EIA data showed.

“The key Northeast region is still indicating relatively mild temperatures well into the 3rd week of this month in likely limiting diesel gains,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

While crude inventories drew by 5.5 million barrels in the week, EIA data showed, much of that reflects shipping disruptions in the Red Sea, said Bob Yawger, director of energy futures at Mizuho.

“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,” he said.

Downbeat economic data sent prices lower earlier in the session. Eurozone business activity shrank in December. German inflation rose, possibly offering the European Central Bank an argument in favour of keeping interest rates steady for some time.

Both oil benchmarks gained about 3% on Wednesday to settle higher for the first time in five days. Oil also found support from American Petroleum Institute data showing crude stocks fell by 7.4 million barrels, double the expected drawdown. – Reuters