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Oil prices held steady on Thursday as markets balanced strong winter fuel demand expectations with concerns over rising U.S. fuel inventories and macroeconomic uncertainties.
- Brent crude futures dipped by 6 cents to $76.10 per barrel at 07:27 GMT.
- West Texas Intermediate (WTI) crude futures declined by 5 cents to $73.27 per barrel.
This follows a 1% decline in both benchmarks on Wednesday, driven by a stronger dollar and larger-than-expected U.S. inventory builds.
Demand vs. Macroeconomic Pressure
Analysts highlighted contrasting market forces. Kelvin Wong, senior market analyst at OANDA, noted, “Seasonal demand supports bullish sentiment, but macroeconomic data and a stronger U.S. dollar cap further gains.”
JPMorgan’s Outlook:
- Oil demand in January is forecast to rise by 1.4 million barrels per day (bpd) year-on-year, reaching 101.4 million bpd.
- Colder-than-average winter conditions and Lunar New Year travel in China are fueling heating and transportation fuel demand.
Market Structure:
- Brent futures’ backwardation widened, with the prompt-month contract trading at a premium over the six-month contract, signaling tightening supply amidst rising demand.
U.S. Inventory Data and Dollar Strength
The Energy Information Administration (EIA) reported increases in gasoline and distillate stockpiles, which weighed on prices. Meanwhile, the U.S. dollar strengthened further, supported by higher Treasury yields ahead of President-elect Donald Trump’s inauguration on January 20.
Supply Adjustments and Price Outlook
Saudi Arabia plans to reduce crude oil supply to China in February, following an increase in official selling prices for Asia—the first hike in three months.
Price Projections:
- WTI crude is expected to range between $67.55 and $77.95 into February, as markets await clarity on Trump’s policy directions and potential fiscal stimulus from China, according to Wong.
Key Takeaways
The oil market is caught between bullish seasonal demand drivers and bearish pressures from inventory builds and a strong U.S. dollar. With supply adjustments and geopolitical developments in focus, oil prices may remain range-bound in the short term.
