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Oil drops, hits lowest since January as U.S. data fans fuel demand fears

Commodities Dec 07, 2022 01:06PM ET
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© Reuters. Oil pours out of a spout from Edwin Drake's original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/Files
 
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By Arathy Somasekhar

HOUSTON (Reuters) -Oil edged to its lowest since the start of the year in volatile trading, after U.S. government data showed an unexpectedly large build in fuel stocks, feeding fears about demand in a market already spooked by an uncertain economy.

Brent futures for February delivery fell $1.20 to $78.15 a barrel, a 1.55% loss, by 12:34 p.m. ET (17:34 GMT). During the session, Brent hit its lowest since Jan. 3.

U.S. crude fell $1.30, or 1.8%, to $72.95 per barrel and earlier touched $72.42, the lowest since late December..

U.S. distillate stocks posted a build 6.2 million barrels, according to the Energy Information Administration, far exceeding estimates for a 2.2 million barrel rise. Gasoline inventories climbed 5.3 million barrels against expectations for an increase of 2.7 million barrels.

The build in fuel stocks outweighed a 5.2 million barrel draw in crude stocks. The American Petroleum Institute had reported a crude stocks draw of around 6.4 million barrels, according to market sources. [API/S][EIA/S]

Lending some support to prices, China announced the most sweeping changes to its anti-COVID regime since the pandemic began, while RIA cited Russia's deputy foreign minister as saying Russia was concerned about a build-up of oil tankers in the Bosphorus Strait.

China's crude oil imports in November rose 12% from a year earlier to their highest in 10 months, data showed.

Brent futures edged into oversold territory, while WTI futures were near it. Brent settled below $80 on Tuesday for only the second time in 2022 and has unwound the year's gains, which had lifted prices close to the all-time high of $147 in March after Russia invaded Ukraine.

Meanwhile, at least 20 oil tankers queuing off Turkey face more delays to cross from Russia's Black Sea ports to the Mediterranean as operators race to adhere to new Turkish insurance rules added ahead of a G7 price cap on Russian oil, industry sources said on Tuesday.

"If confidence in uninterrupted Russian oil supply has played any part in the recent weakness, it was probably misplaced. Tankers getting delayed in Turkish waters is a prime example of that," Tamas Varga of oil broker PVM said.

Russia, the Vedomosti daily reported on Wednesday, is considering options including banning oil sales to some countries to counter the price cap imposed by Western powers.

"There's still tons of uncertainty in the markets today," said Claudio Galimberti, senior vice-president at Rystad Energy, adding crude production in Russia may not drop as much as expected earlier.

Still, warnings from big U.S. banks about a likely recession next year weighed.

The net spec fund long position is now at a six-year low with some prominent funds liquidating in the past few day, said Dennis Kissler, senior vice president of trading at BOK Financial.

Oil drops, hits lowest since January as U.S. data fans fuel demand fears
 

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Comments (4)
Jim Morrison
Jim Morrison Dec 07, 2022 4:07PM ET
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never hear a word about SPR draws....it's Russia Russia Russia or demand fears. yet the economy is strong. jokers.
Can Can
Can Can Dec 07, 2022 11:38AM ET
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Let it fall more and will buy at cheaper price below 60
Kerry Ditto
Kerry Ditto Dec 07, 2022 8:13AM ET
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will stock mkt rally begin today? plausibly, probabaly, presumably
NewB Jr Trader
NewB Jr Trader Dec 07, 2022 5:33AM ET
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If there are curbs on sipyy, then why is price hoing down?
Ndrew Wen
Ndrew Wen Dec 07, 2022 5:33AM ET
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Because us is manipulating
Tre Hsi
Tre Hsi Dec 07, 2022 5:33AM ET
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Ndrew Wen  if US has the power to manipulate oil prices do you think the oil price would have gone up to over $100?
Brad Albright
Brad Albright Dec 07, 2022 5:33AM ET
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The price cap on Russian oil is having its intended effect.
 
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