Oil Dips Again As Traders Continue Worrying About U.S. Stockpile Build

Overlooked were impressive economic recovery figures from China: File Image/Pixabay

Oil prices on Thursday took another mild dip as traders continued to digest the possible implications of a 16.3 million barrel increase in U.S. crude stockpiles, the highest climb since June of 2021.

While analysts in the previous session dismissed the build as an unusually large supply adjustment, it is thought that traders were worried it might indicate waning demand due to high inflation.

Accordingly, they tended to overlook bullish news on Thursday that the U.S. jobs market remains robust, even though manufacturing in the mid-Atlantic region unexpectedly declined.

Also eclipsed was an estimated rebound in Chinese airline travel (to 70 percent capacity) and energy consumption, thanks to that country's communist government finally abandoning the Covid lockdowns that did little to contain the virus but wreaked havoc on the economy.

Brent settled down 24 cents to $85.14 per barrel, and West Texas Intermediate crude settled down 10 cents at $78.49 per barrel.

Giovanni Staunovo, analyst at UBS, observed, "Brent failed again to move above the 100-day moving average this week."

Rebecca Babin, a senior energy trader at CIBC Private Wealth, said of the bullish and bearish news that has caused confusion in the oil sector of late, "The commodity is stuck in neutral as it tries to see which one of the market drivers will be most impactful over the next couple of months."

Not to be overlooked on Thursday was fallout from the Organization of the Petroleum Exporting Countries' (OPEC) plans for 2023, which Bloomberg analyst Javier Blas described  as "Doing absolutely nothing."

Blas went on to argue that the cartel is taking a gamble: "If the group gets its supply and demand calculations wrong, it risks inflicting higher energy prices on a world still fighting elevated inflation."

Blas concluded that "OPEC+ officials are right to argue that they read the market correctly in October, but past performance doesn't guarantee future returns; the cartel risks falling behind the curve in 2023."

Finally, looking ahead to other near-term market influencers, Bob Yawger, director of energy futures at Mizuho, said that U.S. president Joe Biden's recent announcement to release more oil from the country's Strategic Petroleum Reserve will "most likely limit any rallies that develop in coming weeks."