Oil Plunges as Swelling US Stockpiles Signal Weakening Demand
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(Bloomberg) -- Oil plummeted almost $3 a barrel, breaking out of a narrow trading range from earlier in the day, after government data showed inventories swelling to the highest levels since June 2021.
The Energy Information Administration’s report also showed increased inventories of products such as distillate — a precursor for diesel — despite relatively low refinery-utilization rates. The data provides a glum picture of current demand, said Bob Yawger, director of the futures division at Mizuho Securities USA
“We are at a 19-month high in crude oil storage,” Yawger said in an interview. “You can battle against positions all you want, but at the end of the day there were some very bearish developments there.”
Elsewhere, the OPEC+ production cartel decided to keep output steady as the group seeks clarity on demand in China and supplies from Russia before the next round of sanctions. The US Federal Reserve is expected to deliver a smaller interest-rate hike of 25 basis points on Wednesday, though the possibility that the central bank will forcefully reiterate its plan to keep rates in restrictive territory weighed on stocks.
Crude capped a third straight monthly loss in January, even amid optimism that China’s turn away from its strict Covid Zero policy will rekindle demand in the world’s largest crude importer. While growth is picking up, weakness among the country’s manufacturers and home sales suggest the recovery isn’t yet on a sure footing.
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