Written by Yuka Obayashi and Trixie Yap
(Reuters) – Oil prices fell for the second day in a row on Thursday after a significant increase in fuel inventories in the United States, the world's largest oil consumer, although expectations of increased fuel demand in the winter and concerns about tight supplies limited the decline.
Futures fell eight cents to $76.08 a barrel by 0409 GMT. US West Texas Intermediate crude futures fell 11 cents to $73.21. Both prices fell about 0.1% from the previous session.
The two benchmarks fell more than 1 percent on Wednesday as a stronger dollar and a larger-than-expected rise in US fuel inventories affected prices.
The US Energy Information Administration said on Wednesday that gasoline inventories rose by 6.3 million barrels last week to 237.7 million barrels. Analysts polled by Reuters had expected an increase of 1.5 million barrels. (Environmental Impact Assessment/Environmental Assessment)
Distillate stocks rose by 6.1 million barrels in the week to 128.9 million barrels, versus expectations for an increase of 600 thousand barrels.
But crude inventories fell by 959 thousand barrels in the week, compared to analysts’ expectations of a decrease of 184 thousand barrels.
“The increase in US fuel inventories has led to some selling, but the downside is limited due to the winter demand season in the Northern Hemisphere,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
JPMorgan analysts expect oil demand for January to expand by 1.4 million barrels per day year-on-year to 101.4 million barrels per day, driven primarily by “increasing use of heating fuels in the Northern Hemisphere.”
“Global oil demand is expected to remain strong throughout January, driven by colder-than-normal winter conditions that increase heating fuel consumption, as well as an early start to travel activities in China for the Lunar New Year holiday,” analysts said. .
Despite the price decline, the market structure in Brent crude futures suggests that traders are becoming more concerned about tightening supply at the same time as demand is increasing.
The premium for the first-month Brent contract over the six-month contract reached its highest level since August on Wednesday. The widening of this lag, when futures for immediate delivery are higher than futures for later delivery, typically indicates that supply is declining or demand is increasing.
Looking ahead, demand trends in China, the energy and trade policies of the incoming US administration, and its position on the Russia-Ukraine war will be key points of focus, said Kikukawa of Nissan Securities, adding that traders are likely to refrain from taking large positions until the President's appointment. Elected Donald Trump takes office on January 20.
