Oil Down As Crude Inventories Rise, But Analysts Still Expect Market Balance In 2024

Meanwhile, Russia achieves a drilling record: File Image/Pixabay

A day after oil rebounded on the strength of reduced crude exports from Russia, oil prices on Wednesday declined due to reports of another unexpected build in U.S. stocks, effectively quashing earlier gains resulting from more Houthi attacks in the Red Sea. 

West Texas Intermediate settled down more than 1 percent at $71.37 per barrel, while Brent closed lower at $76.80 per barrel after the Energy Information Administration crushed expectations of a draw by reporting a crude build of 1.34 million barrels last week.

As for geopolitical tensions, the Iran-backed Houthis launched their largest drone and missile attacks on merchant vessels in the Red Sea on Wednesday, stoking fears of supply disruption.

Dennis Kissler, senior vice president at BOK Financial, said, "Given the current conditions many analysts are once again calling for world oil consumption to outstrip supply into the first quarter of this year, especially if OPEC remains diligent on production cuts."

In a somewhat contrary vein, Vitol Group's head of Asia on Wednesday predicted that markets will be relatively balanced this year as demand growth struggles to keep pace with new supply from outside OPEC and its allies.

In other oil news on Wednesday, industry data analysed by Bloomberg suggests that Russia drilled oil production wells with a total depth of 28,100 kilometers between January and November 2023, a record for post-Soviet drilling; the theory is that producers are trying to maximize production from older oilfields to keep production rates from falling.

Also on Wednesday, TotalEnergies announced that it will acquire an additional 10.5 percent interest in Namibia's offshore block 2913B and an additional 9.39 percent interest in block 2912 from Impact Oil and Gas, following more discoveries of light oil within the Venus discovery.

Wood Mackenzie noted that Shell's Graff and TotalEnergies' Venus ventures could be transformational for Namibia.