Oil Steady After Nearly 4% Drop Amid Growing Signs Of Oversupply

Oil prices were trading higher after reports that the crude oil inventories fell 0.96% to 4.26 million barrels last week.

This comes after the prices in the Asian market declined nearly 4% on Tuesday. The increase in production from both Russia and the United States has heightened worries about the market being flooded with excess supply.

The Energy Information Administration said that the crude oil inventories fell 0.96% to 4.26 mn barrels last week. In its monthly outlook, stated that the forecast for U.S. crude oil production in 2024 is 13.11 million barrels per day. This is slightly lower than the November projection of 13.15 million barrels per day.

West Texas Intermediate was trading 1.27% higher at $69.48 a barrel, while global benchmark Brent advanced by 1.30% to $74.19 a barrel, as of 9:40 p.m. IST.

Mark Matthews, head of research-Asia at Julius Baer, said during an interaction with NDTV Profit that he does not foresee oil prices dropping to the extent of triggering a recession.

Meanwhile, the Energy Information Administration expects the Brent crude oil prices to rise on an average. "We forecast the Brent crude oil spot price will increase from an average of $78 per barrel in December to an average of $84 per barrel in the first half of 2024, partly driven by recently announced OPEC+ production cuts."

"Despite the announced cuts, we lowered our forecast for the Brent price in 2024. We expect the Brent spot price will average $83 per barrel next year, down from our forecast of $93 per barrel in last month’s STEO," the agency said in its outlook.

Lingering doubts persisted regarding the effectiveness of OPEC+'s planned production cuts in 2024 to counterbalance the surplus crude supply and sluggish growth in fuel demand. Nevertheless, prices received a boost when the U.S. announced its intention to reinforce its Strategic Petroleum Reserve by purchasing 3 million barrels of crude oil until March, signalling support, according to Rahul Kalantri, VP Commodities, Mehta Equities.

"We anticipate crude oil prices to exhibit volatility in today's session. Crude oil finds support at $70.70–70.10, with resistance at $72.10-72.80 for today's session. In terms of INR, crude oil has support at Rs 5,880–5,810 and resistance at Rs 6,090–6,150," Kalantri said.

"Oil prices fell to $73.13, more than 3%, on Tuesday to their lowest level in six months on concerns of oversupply and after U.S. economic data showed an unexpected rise in consumer prices which may lead to higher rates for longer, could slow economic growth and lead to softening oil demand," said Ritesh Bhanshali, director, Mecklai Financial Service Ltd.