Oil Ekes Out Diminishing Returns On Red Sea Angst, Bearish Sentiment Prevails

Meanwhile, the U.S. achieves record crude output: File Image/Pixabay

Worries over trade disruptions due to earlier vessel attacks on the Red Sea proved once again beneficial to oil prices on Wednesday, albeit less than in the previous two sessions.

Brent settled up 47 cents at $79.70 per barrel, while West Texas Intermediate settled up 28 cents to $74.22 per barrel.

The diminishing gains were said to have been influenced partly by increases in U.S. crude inventory stocks despite expectations for a draw: crude rose by 2.9 million barrels in the week to Dec. 15 to 443.7 million barrels, compared with calculations for a 2.3 million barrel drop.

These numbers caused consternation within trading circles considering that the Energy Information Administration also reported that U.S. output rose to a record 13.3 million barrels per day (bpd) last week.

Giovanni Staunovo, analyst at UBS, remarked, "Market participants didn't like the builds in the big three: crude, gasoline and distillate inventories."

Rebecca Babin, a senior energy trader at CIBC Private Wealth, added, "I don't think bears are abandoning their thesis that the market will be in balance to over-supplied next year."

Meanwhile, Jim Burkhard, a vice president at S&P Global, stated in a note that "Not only is the United States producing more oil than any country in history, but the amount of oil [crude oil, refined products and natural gas liquids] that it is exporting is near the total production of Saudi Arabia or Russia."

Finally, a transport jam not related to the Red Sea was reported on Wednesday: nearly 5 million barrels of Sokol grade crude oil from Russia has been caught en route to India refiners in a sanctions trap for a month: one tanker, the NS Century, and two others both owned by Sovocomflot remain stuck near Sri Lanka due to U.S. Treasury Department sanctions on the vessel.