Feb 1, 2023
Oil slips as growing stockpiles cushion threat from Russia ban
The valuations in natural resources are unbelievable: David Taylor
Oil edged lower as U.S. stockpiles increased, signaling that supplies may be sufficient to weather the EU’s latest ban on Russian products, while the Federal Reserve’s interest rate decision loomed over broader markets.
West Texas Intermediate slipped close to US$78 a barrel, breaking out of the narrow US$1 range it had traded in for much of the morning, after the Energy Information Administration reported that U.S. inventories rose to the highest level since June 2021.
Russia has recently “flooded” the market with crude products ahead of an EU ban on its refined products that goes into effect early this month, said Brian Kessens, a portfolio manager at Tortoise, a firm that manages roughly US$8 billion in energy-related assets.
“Fast forward just a month, Russia bans will be in effect, oil demand will tick up, and what I would expect is we start to see draws from inventories,” Kessens said.
Elsewhere, the OPEC+ production cartel decided to keep output steady as the group seeks clarity on demand in China and supplies from Russia before the next round of sanctions. The U.S. Federal Reserve is expected to deliver a smaller interest-rate hike of 25 basis points on Wednesday, though the possibility that the central bank will forcefully reiterate its plan to keep rates in restrictive territory weighed on stocks.
Crude capped a third straight monthly loss in January, even amid optimism that China’s turn away from its strict COVID-19 Zero policy will rekindle demand in the world’s largest crude importer. While growth is picking up, weakness among the country’s manufacturers and home sales suggest the recovery isn’t yet on a sure footing.
Will Brent Crude Hit US$100 or US$70 Next?: Question of the Day
- WTI for March delivery fell 63 cents to US$78.24 a barrel at 11:06 a.m. in New York.
- Brent for April delivery fell 89 cents to US$84.57 a barrel.