Oil prices fell on Wednesday, weighed down by bad news on demand in the United States, which raised fears of a market imbalance, before the decision of the OPEC+ alliance on its production cuts. The price of a barrel of Brent from the North Sea for delivery in February fell by 1.78%, to close at $72.31. A barrel of American West Texas Intermediate (WTI) due in January fell 2.00% to $68.54.
After its rebound the day before, the market was weighed down by the weekly report from the American Energy Information Agency (EIA). On the surface, the publication could have been likely to support prices, as US stocks fell by 5.1 million barrels last week, well beyond the 1.6 million expected by analysts.
Increase in gasoline reserves
Another positive element for black gold prices is the sudden ramp-up of American refineries, which used 93.3% of their capacities, compared to only 90.5% during the previous period. But, at the same time, gasoline reserves jumped by 2.4 million barrels, a sign of an American market which is unable to completely absorb the abundant production of refineries. “And the rise in gasoline stocks will probably continue as we enter the slow months” consumption, with automobile travel traditionally being more limited in winter than in the other three seasons, warned Andy Lipow of Lipow Oil Associates.
A sign of the prevailing gloom, the wholesale price of American diesel for delivery to New York fell by more than 2% on Wednesday, to its lowest level in a month. According to the EIA, volumes of refined products delivered to the US market, considered an implicit indicator of demand, were 2.5% lower than the previous week. To make matters worse, US crude production set a new record last week, at 13.51 million barrels per day. Operators compare this record production and the refinery heatwave with lackluster American demand, all of which risks creating an imbalance.
For Andy Lipow, a possible continuation of production cuts by the Organization of the Petroleum Producing Countries (OPEC) and their allies in the OPEC+ agreement, expected at the end of their meeting on Thursday, could provide a boost with black gold. But he doesn’t expect to see the barrel gain more than a dollar, “because in terms of supply, the market mainly looks at the United States, Canada or Brazil”all of which are accelerating their production, rather than OPEC.
