Crude oil prices fall amid jump in US inventories
Crude oil prices declined in early Asian trade on February 15 after a sharp surge in the US crude inventories and hopes of further interest rate hikes by the US Federal Reserve spooked investors. Concerns over weakness in oil demand further dented sentiment leading to Brent oil trading below $85 a barrel and the US WTI crude plunging below $80 a barrel.
During the early trading hours in the Asian markets, the Brent crude futures declined over 1% to trade at $84.62 per barrel while the West Texas Intermediate (WTI) crude futures also lost over 1.2% to trade at $78.09. This fall was in addition to the $1 per barrel drop in prices in the previous trading session.
Reasons for the fall
One of the major reasons for the fall in crude prices is the surge in US crude inventories that was much higher than street expectations. In the week ended on February 10, the US crude inventories rose by 10.5 million barrels according to the figures posted by the American Petroleum Institute.
This surge was much higher than the anticipated increase of 1.2 million barrels according to a poll conducted by Reuters. This data could signal a fall in the demand for crude oil. Similarly, gasoline and distillate inventories rose by 846,000 barrels and 1.7 million barrels respectively.
Another reason for this fall was the announcement made by the US Department of Energy which stated that nearly 26 million barrels of oil will be sold from the nation’s strategic reserve. The strategic reserve is at its lowest level in four decades.
In order to support the prices, the Oil and Petrol Exporting Countries (OPEC) raised their forecast for the global oil demand growth. Due to the reopening of China and other supply constraints, this has been the first upward revision in the forecast in months.
Crude oil prices have been rising since the Russia-Ukraine war. The prices rose for the first half of 2022 but have been declining since then. After touching a high of nearly $125 per barrel in March 2022, crude oil prices have been declining and have been trading around $80 per barrel now.
According to OPEC, the global oil demand will see likely an increase of 2.3 million barrels per day. This forecast was higher than the previous by 100,000 barrels per day.
The retail inflation for the month of January was 6.52%, breaching the upper tolerance limit of 6% set by the Reserve Bank of India (RBI).