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Oil Down With US Crude Inventory Build Signaling Drop In Demand

23.02.2024 11:57

Concern of Red Sea conflict negatively affecting global oil supply restricts downward price movement.

Oil prices declined on Friday, with data indicating a drop in demand in the US, the world's biggest oil consumer, while the threat of an acceleration in Red Sea attacks restricted the drop in prices.

The international benchmark crude Brent traded at $83.24 per barrel at 10.50 a.m. local time (0750 GMT), a 0.51% drop from the closing price of $83.67 a barrel in the previous trading session on Thursday.

The American benchmark, West Texas Intermediate (WTI), traded at the same time at $78.13 per barrel, down 0.61% from Thursday's close of $78.61 per barrel.

The Energy Information Administration shows an increase in US commercial crude oil inventories of around 3.5 million barrels to 443 million barrels during the week ending Feb. 16, signaling a drop in demand to push prices lower. Strategic petroleum reserves, which are excluded from commercial crude stocks, also increased by 700,000 barrels.

In addition, the expectation that high interest rates in the US could lower oil demand underpinned the downward price trajectory. While uncertainty continues about when the US Federal Reserve (Fed) will start reducing interest rates, experts are closely following the speeches of Fed officials for insights into future decisions.

On Thursday, Fed Vice Chairman Philip Jefferson said it would be acceptable to start lowering the policy rate late in the year if the economy grows, but he declined to give a timeline because of unforeseen risks that could change the bank's decisions.

Philadelphia Fed President Patrick Harker noted that the biggest risk is lowering rates too early, saying, "I would caution anyone from looking for a rate cut right now and right away."

Meanwhile, concerns over the continuation of the conflict in the Red Sea that negatively affects global oil supplies are restricting downward price movements.

On Thursday, Abdulmalik al-Houthi, the leader of the Iran-backed Houthis in Yemen, threatened to increase attacks on Israeli, American and British ships passing through the Red Sea, the Gulf of Aden and Bab al-Mandeb. The leader said that 48 ships belonging to Israel, the US and the UK have been targeted in the Red Sea and Oman Sea since Oct. 7, when attacks on Gaza began.

The US Central Command (CENTCOM) said Thursday it shot down six Houthi drones in the Red Sea that were an "imminent threat." -

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