Oil prices experienced a slight dip on Wednesday, despite previously hitting a 10-month high, as a surprising build in U.S. crude inventories countered expectations of tight crude supply for the remainder of the year.
International benchmark Brent futures fell by 18 cents, closing at $91.88 per barrel. The session high of $92.84 per barrel was the highest since November.
U.S. West Texas Intermediate crude (WTI) declined by 32 cents, settling at $88.52 per barrel. Its session high of $89.64 per barrel was also the highest since November.
Front-month Brent futures contracts traded at a premium of as much as $4.90 a barrel over those for delivery six months ahead, marking the widest spread since November. This suggests a tightening supply.
Despite recent weeks lacking significant price movements, Brent’s 30-day close-to-close futures volatility has reached its lowest level since July 2021.
Prices rose despite government data indicating that U.S. crude, gasoline, and distillate inventories increased last week.
U.S. crude inventories unexpectedly rose by 4 million barrels during the week, defying analysts’ expectations of a 1.9 million-barrel drop, according to a Reuters poll.
Matt Smith, Lead Oil Analyst for the Americas at Kpler, noted, “U.S. crude inventories have increased significantly despite rising refining activity and a drop in Cushing, Oklahoma, inventories to their lowest level this year, primarily due to significantly higher net imports.”
Saudi Arabia and Russia have extended their production cuts of 1.3 million barrels per day (bpd) of crude until the end of the year. The International Energy Agency (IEA) stated that this extension will result in a substantial market deficit throughout the fourth quarter.
Bank of America analysts suggested that the continuing supply cuts could push Brent futures above the $100 per barrel threshold by the end of the year.
U.S. consumer prices increased in August, driven by a 10.6% surge in retail gasoline prices, according to the Bureau of Labor Statistics.
The U.S. Energy Department has been in discussions with oil producers and refiners to ensure stable fuel supplies as gasoline prices rise, said Jared Bernstein, Head of the White House Council of Economic Advisers.
Forecasters expect the European Central Bank to raise interest rates at its upcoming meeting.
The IEA revised down its fourth-quarter world crude oil demand growth forecast by 600,000 bpd, a significant adjustment according to Investec analyst Callum Macpherson. He noted that the deficit now roughly equals Saudi Arabia’s additional voluntary cut.
On Wednesday, four oil ports that had been shut down due to powerful storms in Libya reopened.
