Tokyo — Oil prices retreated a tad on Thursday on weak demand in the US and broad oversupply risks, which countered concern over attacks in the Middle East and Russia’s war in Ukraine.
Brent crude futures were down 14c, or 0.21%, at $67.35 a barrel by 4.33am GMT, and US West Texas Intermediate (WTI) crude futures lost 15c, or 0.24%, to $63.53.
The benchmark contracts gained more than $1 each on Wednesday following Israel's attack on Hamas leadership in Qatar the day before, and as Poland scrambled its own and Nato air defences to shoot down suspected Russian drones that had strayed into its airspace during an attack on western Ukraine.
The gains were a continuation of an upward trend for oil prices for much of this month after they hit a three-month low on September 5.
That said, neither event held any immediate risk of disruption to oil supplies, and market attention has turned to supply-and-demand balances, with rising oil stocks, falling producer prices and a slowing labour market pointing to a softening US economy.
US crude inventories rose by 3.9-million barrels in the week to September 5, the Energy Information Administration said, against expectations of a draw of 1-million barrels. Petrol stocks also rose, adding 1.5-million barrels, against the expectation of a draw of 200,000 barrels.
The softer economy has meant that the US Federal Reserve is expected to cut interest rates next week.
“Easing labour market conditions mean the FOMC [Federal open market committee] is set to vote for a 25bp [basis point] cut next week ... although a rare triple dissent in favour of a 50bp move could steal the headlines,” Stephen Brown, deputy chief economist for North America at Capital Economics, said in a note.
The European Central Bank (ECB), meanwhile, is set to leave its interest rates unchanged on Thursday.
On the supply side, oil cartel Opec and allies, collectively known as Opec+, on Sunday decided to raise production from October.
While the increases are smaller than previous months and some expectations, the move adds to the oil market weakness. Oil prices were set to drop significantly in the months ahead as rising output would lead to large oil inventory builds, the EIA said this week.
“Despite lower trending prices and stagnating oil demand growth, oil producers — led by Opec+ — have been adding barrels, suggesting an imbalance is likely to form by the end of 2025 that will push the market into oversupply and drive crude prices even lower,” Eurasia Group consultancy said in a note.
Reuters
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