Oil fell for a second day as the International Energy Agency warned of slowing demand growth after data showed a rise in U.S. crude inventories.

Brent declined toward US$81 a barrel after dropping 1.4 per cent on Wednesday. The market could be in surplus all year, the IEA said, citing demand growth that’s losing stream and expanding non-OPEC supplies.

That outlook came a day after nationwide crude stockpiles in the U.S. expanded by a greater-than-expected 12 million barrels last week, spurring an increase in total oil inventories.

“Markets were shocked by the quantum of the increase” in crude inventories, said Han Zhong Liang, investment strategist at Standard Chartered Plc. “We expect the oil market to remain largely balanced in 2024” with prices likely to hold around current levels for now, he said.

Crude has failed to break out of a $10-a-barrel range this year, with tensions in the Middle East and efforts by OPEC+ to curb production countered by robust supplies from drillers outside the cartel and concerns global demand growth will slow over 2024. Expectations that U.S. interest rates could remain higher for longer as inflation persists have also been a headwind.

Still, market metrics continue to signal tight conditions, with timespreads for both major benchmarks holding in a bullish, backwardated structure despite having come off slightly. Refiners’ profits from making fuels like diesel and gasoline also remain elevated.

Prices:

• Brent for April settlement fell 0.6 per cent to $81.10 a barrel at 10:19 a.m. in London.
• WTI for March delivery declined 0.7 per cent to $76.11 a barrel.