Oil prices declined after the Energy Information Administration (EIA) reported a significant increase in fuel inventories, despite a 5.5 million barrel draw in crude oil for the week ending December 29, 2023. The report showed a large gasoline inventory build of 10.9 million barrels and a middle distillate inventory increase of 10.1 million barrels. These inventory builds overshadowed the crude draw and contributed to the downward pressure on oil prices. Meanwhile, geopolitical tensions and an outage at Libya’s largest oil field, Sharara, have caused some upward movement in prices, with Brent crude approaching $80 per barrel and West Texas Intermediate above $70 per barrel. Goldman Sachs predicted Brent crude would trade between $70 and $90 per barrel for the year, citing stable OPEC supply and geopolitical risks as major price factors.
Crude oil prices continue to decline due to concerns over oversupply and weak demand, with traders awaiting the outcome of the Fed meeting and the Energy Information Administration's weekly oil inventory report. Russian oil exports have reached their highest level since July, casting doubt on the implementation of additional OPEC+ output cuts in January. Rising U.S. oil production has added to oversupply concerns, pushing the futures market into a contango until mid-2024. Despite OPEC+ efforts, oil prices have fallen by about 25% since September, with WTI trading below $70 per barrel and Brent crude slipping below $75 per barrel.
Oil markets are experiencing volatility due to mixed data, with the latest EIA report showing both bullish and bearish drivers. While crude refining has hit the highest level since August 2019, U.S. crude production has also hit the highest levels since April 2020 while crude exports have declined. Reports of Iran resuming oil exports after a nuclear deal could ease sanctions, but it remains to be seen how realistic Iran's oil ambitions are and how much they will impact the market.
