Oil prices drifted lower on Thursday as weak demand concerns over a large build in the crude inventory in the United States plus a strong dollar overtook potential supply disruption as the centre of focus, Reuters reported.
The main Brent crude futures contract failed to hold onto its earlier gains and were down by 23 cents, or 0.2%, to $93.87 a barrel by 0636 GMT. U.S. West Texas Intermediate crude slipped by 9 cents, or 0.1%, to $88.39.
Data released by the Energy Information Administration showed U.S. crude and distillate inventories rose more than expected in the most recent week, suggesting weaker fuel demand and putting a lid on oil prices.
The stronger dollar is also a headwind for oil demand as dollar-denominated commodities, including crude oil, become more expensive for buyers holding other currencies. The dollar index gained 0.2% on Thursday near its recent peak.
Meanwhile, expectations of further U.S. interest rate hikes will continue to cloud the market and limit the rebound of oil prices, said analysts from Haitong Futures.
However, the increasing likelihood of a U.S. rail stoppage due to an ongoing labour dispute is adding support to the market. Three unions are negotiating a new contract that could affect rail shipments, which are important for crude and product deliveries.
The International Energy Agency said Wednesday it expects widespread switching from gas to oil for heating purposes, saying the additional oil demand will average 700,000 barrels per day (bpd) in October 2022 to March 2023 – double the level of a year ago. That, along with overall expectations for weak supply growth, also helped boost the market. Reuters