Oil Falls as Investors Scoop up Profits
Oil prices fell on Friday after reaching seven-year highs this week. Investors took profits following a buildup in crude and fuel inventories in the United States. However, overall sentiment remained buoyant due to tight supply and geopolitics concerns.
By 0747 GMT, Brent crude futures had fallen $1.00, or 1.1 percent, to $87.38 per barrel. Earlier, the contract fell by 3%, the most since December 20. The global benchmark had reached $89.50 per barrel the day before, its highest level since October 2014.
West Texas Intermediate (WTI) crude futures in the United States fell $1.16, or 1.4 percent, to $84.39 per barrel. The contract had previously dropped as much as 3.2 percent, the most since December 20. The recent rally in crude prices appeared to have peaked on Thursday, as Brent and WTI ended the trading session with minor losses. However, both benchmarks have gained more than 10% this year and are on track for a fifth consecutive weekly gain.
An unexpected increase in U.S. crude stockpiles prompted investors to take profits.
According to the U.S. Energy Information Administration, gasoline inventories in the United States, the world’s largest oil consumer, increased by 5.9 million barrels to their highest level since February 2021. (EIA).
Last week, crude stockpiles increased by 515,000 barrels, exceeding industry expectations.
The EIA also reported a slight drop in refinery runs, indicating lower crude demand.
Slumping stock markets amid fears that the Federal Reserve will move aggressively to raise rates this year also weighed on sentiment.
Concerns about oil supply increased this week after Yemen’s Houthi group attacked the UAE, OPEC’s third-largest producer. In contrast, Russia, the world’s second-largest oil producer, has built up a significant troop presence near Ukraine’s border, fueling fears of an invasion.
However, the International Energy Agency (IEA) predicted on Wednesday that oil supply would soon outstrip demand because some producers are planning to pump at or above all-time highs. In contrast, demand remains stable despite the spread of the Omicron coronavirus variant.
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