Oil drops on demand worries after US gasoline inventories swell

December 6, 2023 – 4:27 PM UTC

HOUSTON (Reuters) – Oil prices fell by 2.5% on Wednesday, as a bigger-than-expected rise in U.S. gasoline inventories worried markets about demand and outweighed a draw in crude stocks.

Brent crude futures fell $1.96, or 2.53%, to $75.27 a barrel by 10:58 a.m. ET (1558 GMT). U.S. WTI crude futures fell by $2.19, or 3.03%, to $70.14 a barrel.

U.S. gasoline stocks rose by 5.4 million barrels last week, the Energy Information Administration said, more than quintuple the 1 million-barrel rise that analysts had expected.

Crude inventories fell by 4.6 million barrels, far exceeding the 1.4 million-barrel drop analysts had expected.

“There is demand destruction coming in from the fuel side. The market is more demand focused than supply focused right now,” Dennis Kissler, senior vice president of trading at BOK Financial.

On Tuesday, both benchmarks settled at their lowest since July 6, a fourth straight session of losses.

OPEC+, the Organization of the Petroleum Exporting Countries and allies such as Russia agreed late last week on voluntary output cuts of about 2.2 million barrels per day (bpd) for the first quarter of 2024. This week, Saudi and Russian officials said the cuts could be extended or deepened beyond March.

On Wednesday, Russian president Vladimir Putin traveled to the United Arab Emirates and Saudi Arabia to meet with the UAE’s President Sheikh Mohammed Bin Zayed Al Nahyan and Saudi Crown Prince Mohammed bin Salman. Oil and OPEC+ were on the agenda.

Concerns over China’s economic health also weighed on prices, a day after rating agency Moody’s lowered the outlook on China’s A1 rating to negative from stable.

In the U.S., a drop in exports caused the trade deficit to widen in October, which could drag economic growth in the fourth quarter.

“Clearly traders were already feeling bearish and now oil is back at a five-month low and heading for a fifth day of losses,” OANDA analyst Craig Erlam said.

Reporting by Arathy Somasekhar and Georgina McCartney in Houston, Robert Harvey in London, Andrew Hayley in Beijing and Trixie Yap in Singapore, Editing by Louise Heavens, Elaine Hardcastle and David Gregorio