WTI retreats on surging US oil inventories, global demand woes

Due to record output levels and a greater-than-anticipated buildup in US crude inventories, WTI crude oil drops to $76.58 per barrel at the time of writing, down 1.92%.

There are worries about possible drops in oil demand due to the Eurozone’s poor statistics and Japan’s economic contraction. Oil prices are supported despite downward pressure by output cuts by OPEC+ and encouraging economic data from China.

Late in the New York session on Wednesday, WTI fell as US data indicated that crude oil inventories were rising despite record output and concerns about weakening oil demand in Asia. WTI is currently down 2.14% at $76.50 per barrel.

WTI price pressure comes from weak economic data out of Asia and a record build in US inventories. The US Energy Information Administration (EIA) reported that last week’s inventory level, which was 421.9 million barrels, increased by 3.6 million barrels.

Although the report indicates a significant build-up of crude stockpiles in the United States, a Reuters poll predicted a build-up of 1.8 million barrels.

According to the data, domestic crude output in the United States remained at a record 13.2 million barrels per day. US oil output growth is a “headwind for the market, and the U.S. is a problem for OPEC+”.

With a $3.50 decline, WTI has continued to decline from its weekly high of $79.72, which was further exacerbated by weak economic data out of Japan.

Japan’s economy contracted in the third quarter, ending two straight quarters of growth driven by low exports and low domestic consumption.

Despite the optimistic outlook for oil demand held by the Organisation of Petroleum Exporting Countries and its allies (OPEC+), there is a risk of a decline in demand due to recent negative data from the Eurozone and Japan’s economic contraction.

WTI prices would therefore be under pressure, but the oil drop was mitigated by Saudi Arabia and Russia’s promise to reduce output by 1.3 million barrels by the end of the year.

The most recent data from China showed a more promising economic picture, with retail sales exceeding forecasts and industrial output growing more quickly than anticipated.