Oil Down On Stockpile Builds, But Sentiment Still Skewed To The Bulls

The New Year is shaping up to be robust trading-wise despite gloomy predictions: File Image/Pixabay

Despite trader optimism in earlier sessions that included the expectation of crude stocks falling in the U.S., the Energy Information Administration on Wednesday revealed that they had actually climbed for the week – and oil prices slumped accordingly.

Brent settled down 89 cents to $76.23 per barrel, while West Texas Intermediate settled down 93 cents to $73.32.

The EIA reported that gasoline stocks rose last week by 6.3 million barrels last week to 237.7 million barrels, compared with expectations for a 1.5 million barrel build; and distillate stockpiles rose by 6.1 million barrels to 128.9 million, versus expectations for a 600,000 barrel rise.

Crude inventories dropped by 959,000 barrels to 414.6 million compared with expectations for a 184,000 barrel draw.

Still, a tentative sense of optimism survived Wednesday's trading: Josh Young, chief investment officer at Bison Interests, said, "I would be concerned if we saw more substantial products builds over the next few weeks; and in the meantime, the cold snap could constrain crude oil supply and increase heating oil demand."

Matt Smith, head U.S. analyst at Kpler, pointed out that "Given the strong pace of refining activity, it is no surprise to see large builds to the products," and he added that gasoline demand actually rose last week: EIA figures showed that total motor gasoline supplied (a proxy for demand) was 8.48 million barrels per day (bpd), up from 8.168 million bpd a week earlier.

In terms of overseas oil demand, possible good news came from Saudi Aramco saying it would raise oil prices for Asian buyers next month, which to Stephen Innes, managing partner at SPI Asset Management, suggested that Aramco's physical traders "anticipate tighter market conditions in China due to economic stimulus effects."

Traders were also said to have taken solace in the news that output from the Organization of the Petroleum Exporting Countries (OPEC) fell in December after two months of increases, due to field maintenance in the United Arab Emirates compensating for a rise in production by other members.

Plus, bullish Bloomberg reminded audiences that "Oil has had a strong start to 2025" and credited this in part to U.S. president-elect Donald Trump's aim to tighten sanctions on Iran when he returns to the White House in a few weeks.