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Oil prices settle higher as US crude supplies rise less than expected

Published 02/21/2024, 10:02 PM
Updated 02/22/2024, 09:02 AM
© Reuters. Oil prices settled higher Thursday, as U.S. crude supplies rose less than expected adding to hopes of tightening global supplies amid ongoing disruptions owing to the conflict in the Middle East.

By 14:30 ET (19.30 GMT), the U.S. crude futures rose 0.9% to settle at $78.61 a barrel and the Brent contract rose 0.8 to $83.67 a barrel.

U.S. inventories surprise to upside with huge build

Inventories of U.S. crude increased by roughly 3.5M barrels in the week ended Feb. 16, missing estimates for build of about 3.9M barrels. That was in sharp contrast to a report a day earlier from the American Petroleum Institute showing U.S. inventories grew by 7.2 million barrels.

The lower-than-expected build comes as domestic crude oil production remained at near record level of 13.3M barrel per day, while refinery utilization was unchanged 80.6% from the prior week, hovering near the lowest level in two years following weather-related disruptions.

Gasoline inventories, one of the products that crude is refined into, fell by roughly 294,000 barrels against expectations of a draw of 2.1M barrels while distillate stockpiles declined by 4M barrels, compared to expectations of a draw of 1.7M barrels.

Fed jitters dampen demand outlook

Traders also remained on edge over sluggish demand, after the minutes of the Federal Reserve’s late-January meeting showed the central bank was in no hurry to begin cutting interest rates.

A chorus of Fed officials also reiterated the bank’s stance this week, citing concerns over sticky inflation. Higher rates stymie economic activity, which in turn dents oil demand.

Middle East tensions rise amid ongoing Red Sea skirmish

Middle East tensions remained fraught after Houthis rebels vowed to step up their attacks on ship in the Red Sea in a show of support for the Palestinian cause amid the ongoing Gaza war.

Houthi leader Abdulmalik al-Houthi said the group had introduced "submarine weapons" in their attacks on vessels, adding that the attacks are "continuing, escalating, and effective."

Hopes for a ceasefire to halt the Israel-Gaza war, meanwhile, were given a boost after Hamas chief Ismail Haniyeh arrived in Cairo for talks. Israel previously rejected a Hamas' proposed ceasefire deal, with Prime Minister Benjamin Netanyah described the demands, which included calls for the withdrawal of Israeli troops from Gaza as "delusional".

(Peter Nurse, Ambar Warrick contributed to this article.)

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