© Reuters. FILE PHOTO: An oil and gas industry worker walks during operations of a drilling rig at Zhetybay field in the Mangystau region, Kazakhstan, November 13, 2023. REUTERS/Turar Kazangapov/File Photo
By Yuka Obayashi
TOKYO (Reuters) – Oil prices eased early on Thursday after a larger-than-expected build in stockpiles stoked worries about slow demand, while signs that U.S. interest rates could remain elevated for longer also added to pressure.
futures fell 22 cents, or 0.3%, to $83.46 a barrel by 0124 GMT. U.S. West Texas Intermediate crude futures were down 30 cents, or 0.4%, to $78.24 a barrel.
U.S. crude oil stockpiles rose while gasoline and distillate inventories fell last week as refiners ran at below seasonal lows due to planned and unplanned outages, the Energy Information Administration said on Wednesday. [EIA/S]
Crude inventories rose for the fifth consecutive week, increasing by 4.2 million barrels to 447.2 million barrels in the week ended Feb. 23, the EIA said, compared with analysts’ expectations in a Reuters poll for a 2.7 million-barrel rise.
“Large stockpiles heightened investors’ worries over a slow economy and reduced oil demand in the U.S.,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
“The anticipation of delayed U.S. rate cuts also weighed on the market sentiment as it could undermine oil demand,” he said.
High borrowing costs typically reduce economic growth and oil demand.
Traders have already dialled back expectations for U.S. interest rate cuts after a slew of strong data, including hot consumer price index and producer price index readings. They expect an easing cycle to kick off in June, compared with the start of 2024 when bets were on March.
Market participants are now waiting for the U.S. personal consumption expenditures price index, the Fed’s preferred measure of inflation, for more trading cues.
The index, to be released on Thursday, is expected to show prices ticked up 0.3% on a monthly basis in January.
Still, the conflict in the Middle East is expected to keep a floor under oil prices, Rakuten’s Yoshida said.
Hamas urged Palestinians on Wednesday to march to Jerusalem’s Al-Aqsa Mosque at the start of Ramadan next month, raising the stakes in negotiations for a truce in Gaza, which U.S. President Joe Biden hopes will be in place by then.
But both Israel and Hamas have played down the prospects for a truce and Qatari mediators have said the most contentious issues are still unresolved.
