Oil prices kept to a tight range in Asian trade on Wednesday as mixed signals on global supply and demand saw Brent struggle to break above key levels, while U.S. inventory data also provided differing cues.
Some U.S. oil production capacity came back online after disruptions from cold weather, while production at Libya’s largest oilfield also restarted earlier this week. This was accompanied by data showing an increase in Norwegian crude output.
While the trend pointed to increased oil supply in the near-term, it was somewhat offset by continued concerns over an escalating conflict in the Middle East. The Israel-Hamas war raged on, while U.S. and UK forces continued to clash with the Houthis in Yemen and the Red Sea.
These differing signals saw crude prices establish a tight trading range this week, and also kept Brent prices from sustainably breaching the $80 a barrel level.
Brent oil futures expiring in March steadied at $79.60 a barrel, while West Texas Intermediate crude futures were flat at $74.32 a barrel by 20:09 ET (01:09 GMT).
Both contracts were nursing a weak start to 2024, amid persistent concerns that cooling economic growth this year will weigh on oil demand. Oil prices slide over 10% in 2023 on concerns over less tight markets and waning demand.
Weak data from China- the world’s largest oil importer- was a major point of contention for crude markets, after country clocked weaker-than-expected gross domestic product figures in the fourth quarter.
Focus is now on a swathe of purchasing managers index readings from major economies, due this week, to gauge the state of economic activity in January.
Fourth-quarter U.S. GDP data is also due on Thursday, while PCE price index data- the Federal Reserve’s preferred inflation gauge- is due on Friday.
Strength in the dollar- amid growing bets on higher-for-longer U.S. rates- also added to the pressure on oil markets.
US inventories make for more mixed cues- API
Data from the American Petroleum Institute showed that U.S. crude inventories shrank by 6.7 million barrels in the week to January 19, as severe cold weather across swathes of the country disrupted production.
But the API data showed a sustained increase in gasoline inventories and a small draw in distillate stockpiles, indicating that demand in the world’s largest fuel consumer remained weak as cold weather also disrupted travel in the country.
U.S. gasoline inventories saw outsized builds for every week so far in 2024, indicating a severe decline in fuel demand as travel conditions deteriorated. U.S. gasoline futures remained close to two-year lows.
The API figures usually herald a similar reading from official inventory data, which is due later on Wednesday. Analysts expect a draw of 3 million barrels in oil inventories, while gasoline stockpiles are expected to increase by 2.2 million barrels.