SINGAPORE: Oil prices were little changed on Thursday, with investors weighing firm winter fuel demand expectations against large builds of fuel inventories in the US, the world’s biggest oil user, and macroeconomic concerns.
Brent crude futures fell 6 cents to $76.1 a barrel by 10:27 a.m. Saudi time. US West Texas Intermediate crude futures fell 5 cents to $73.27.
Both benchmarks fell more than 1 percent on Wednesday as a stronger dollar, and the bigger-than-expected rise in US fuel stockpiles weighed on prices.
“The oil market is still grappling with opposite forces — seasonal demand to support the bulls and macro data that supports a stronger US dollar in the medium term ... that can put a ceiling to prevent the bulls from advancing further,” said OANDA senior market analyst Kelvin Wong.
JPMorgan analysts expect oil demand for January to expand by 1.4 million barrels per day year-on-year to 101.4 million bpd, primarily driven by “increased use of heating fuels in the Northern Hemisphere.”
“Global oil demand is expected to remain strong throughout January, fueled by colder-than-normal winter conditions that are boosting heating fuel consumption, as well as an earlier onset of travel activities in China for the Lunar New Year holidays,” the analysts said.
The market structure in the Brent futures is also indicating that traders are becoming more concerned about supply tightening at the same time the demand is increasing.
The premium of the first-month Brent contract over the six-month contract reached its widest since August on Wednesday. A widening of this backwardation, when futures for prompt delivery are higher than for later delivery, typically indicates that supply is declining or demand is increasing.
Nevertheless, official Energy Information Administration data showed rising gasoline and distillates stockpiles last week in the US.
The US dollar firmed further on Thursday, underpinned by rising Treasury yields ahead of US President-elect Donald Trump’s entrance into the White House on Jan. 20.
Looking ahead, WTI crude oil is expected to oscillate within a range of $67.55-$77.95 into February as the market awaits more clarity on Trump’s administration policies and fresh fiscal stimulus measures out of China, said OANDA’s Wong.
