Sun, April 21, 2024

Oil Prices Declined Due to Two Challenges

Oil prices and Russia

Oil prices fell on Thursday. Prices declined on indications of rising U.S. stocks and as investors took profits after a recent price rally, but robust demand and short-term supply disruptions continue to support oil prices close to their highest since 2014.

Brent crude futures dropped 45 cents or 0.5% to $87.99 a barrel by 12:42 GMT after declining more than 1% in earlier trade. It jumped to $89.17 on Wednesday, its highest since October 2014. 

U.S. West Texas Intermediate (WTI) crude futures for delivery in February fell 46 cents or 0.5% to $85.50 a barrel. It declined 0.5% after dropping nearly 1% in earlier trade. Notably, the contract, which expires on Thursday, rose to $87.91 on Wednesday. 

On Thursday, the more active WTI contract dropped 34 cents or 0.4% to $85.46.

Oil prices and risk factors 

Supply concerns grew this week after a fire temporarily stopped flows through an oil pipeline running from Iraq’s Kirkuk to the Turkish city of Ceyhan.

An attack by Houthis on the United Arab Emirates also heightened geopolitical risks. The country is the third-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC). 

The oil market is also supported by supply shortfalls from OPEC and its allies. On Wednesday, the International Energy Agency said OPEC+ produced about 800,000 barrels per day below its production targets in December. 

The agency said that while the oil market could be in a significant surplus in the first quarter of 2022, inventories are likely to be well below pre-pandemic levels. The International Energy Agency upgraded its 2022 demand forecast. 

Furthermore, a rise in U.S. oil inventories last week weighed on prices. Last week, crude stocks rose by 1.4 million barrels while gasoline inventories rose by 3.5 million barrels. During the same period of time, distillate stocks declined by 1.2 million barrels. 

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