However, numbers suggest demand fears are overblown: File Image/Pixabay
A build in U.S. inventories plus record output in that country quashed the dwindling bullish sentiment exhibited by oil traders in recent sessions on Wednesday, with one key benchmark plummeting by 2 percent.
Brent settled down $1.29, or 1.6 percent, at $81.18 per barrel, while West Texas Intermediate settled down $1.60, or 2 percent, at $76.66 after the Energy Information Administration reported that crude stocks rose by 3.6 million barrels last week to 421.9 million barrels, compared to analytical expectations of a 1.8 million barrel increase.
The EIA also disclosed that crude production was still at a record 13.2 million barrels per day (bpd), a volume that it had achieved in October.
Mary Daly, president, Federal Reserve Bank of San Francisco
We have to be bold enough to say 'we don't know'
Still, demand worries of traders continued to be unfounded as the EIA also reported gasoline stocks declining by 1.5 million barrels last week and diesel inventories falling at 1.4 million barrels; this came on the heels of the Organization of the Petroleum Exporting Countries' (OPEC) earlier suggesting that demand in the U.S. and China hasn't declined enough to warrant concern.
A similar good news/bad news scenario was offered by China, where industrial fuel demand weakened but industrial output increased and retail sales growth exceeded expectations in October.
In other oil news on Wednesday, the Russian Finance Ministry stated that its crude oil export duty will be reduced by 5.7 percent for December as the price of its Urals blend drops to about $79 per barrel; the new duty will be the equivalent of $3.37 per barrel or $24.7 per ton.
Meanwhile, Amrita Sen, co-founder of Energy Aspects, told media that Saudi Arabia may extend its voluntary output cuts into the first quarter or first half of next year, with fundamentals still being too strong to support a reversal of policy.
Finally, while Morgan Stanley and other forecasters expected the U.S. Federal Reserve to start reducing interest rates by June next year, the issue of rates once again became the source of bearish consternation on Wednesday when Mary Daly, president of the Federal Reserve Bank of San Francisco, suggested that rates may remain elevated.
She said, "We have to be bold enough to say 'we don't know' and bold enough to say 'we need to take the time to do it right'.
"What I worry about is that without a sufficient amount of information about whether we're really on that disinflationary process that brings us back to 2 [per cent], we have to 'stop-start'."