Oil dips on bigger-than-expected US crude stockbuild, oversupply concerns

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices edged lower on Thursday, as rising U.S. crude inventories added to concerns of oversupply, while the dollar's ascent to a one-year high raised demand fears.

Brent crude futures were down 24 cents, or 0.3% at $72.04 a barrel at 1:14 p.m. ET (1814 GMT). U.S. West Texas Intermediate crude futures (WTI) (CLc1 ) were down 27 cents, or 0.4% at $68.15.

Brent was on track to lose more than 2% for the week, while WTI was set to end the week over 3% lower if losses held.

U.S. crude inventories rose by 2.1 million barrels last week, data from the Energy Information Administration showed, much more than analysts' expectations in a Reuters poll for a 750,000-barrel rise.

Helping to support prices, however, U.S. gasoline stocks fell unexpectedly last week to a two-year low due to a surge in demand, the EIA said.

Meanwhile, the International Energy Agency forecast global oil supply will exceed demand in 2025 even if cuts remain in place from OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies like Russia, as rising production from the U.S. and other outside producers outpaces sluggish demand.

The Paris-based agency raised its 2024 demand growth forecast by 60,000 barrels per day (bpd) to 920,000 bpd, and left its 2025 oil demand growth forecast little changed at 990,000 bpd.

The premium of the front month WTI contract over the second month contract also narrowed this week to its smallest since June. The narrowing of the premium, or backwardation, indicates that a perception of tight supply for prompt delivery has eased.

The dollar surged to a one-year high, and headed for a fifth straight daily gain fuelled by higher yields and Donald Trump's election victory in the United States.

A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies, which can reduce demand.

A rally in U.S. 10-year Treasury yields and a surge in the 10-year break-even inflation rate to 2.35% added to demand worries, said Kelvin Wong, senior market analyst at OANDA.

"(This) increases the odds of a shallow Fed interest rate-cut cycle heading into 2025 (and) overall, there is less liquidity to stoke an increase in demand for oil," he added.

OPEC on Tuesday cut its forecast for global oil demand growth for this year and next, highlighting weakness in China, India and other regions, marking the producer group's fourth consecutive downward revision in the 2024 outlook. 

"Crude futures are trying to establish an equilibrium pricing, as a rising U.S. dollar index is creating a further headwind, along with a Trump administration that will now have control of Congress, which is likely to roll back most of the Biden administration's energy policies," Dennis Kissler, senior vice president of trading at BOK Financial, said in a note.



Brent crude is expected to average $80 across 2025, down from a forecast at the end of September for $85, UBS Switzerland AG's oil strategist Giovanni Staunovo wrote in a note, citing lowered demand growth estimate, particularly from China.

"Overall, we see the oil market as balanced to marginally oversupplied next year," Staunovo said.

Source: Investing.com