As U.S. Economic Reports Raise Concerns About Demand, Oil Prices Fall

In volatile trading, the price of oil fell to its lowest level since the beginning of the year as U.S. government statistics indicated an unexpectedly large increase in fuel inventories, stoking worries about demand in a market already shaken by an uncertain economy.

At 12:34 p.m. ET, Brent futures for February delivery declined $1.20, or 1.55%, to $78.15 a barrel (17:34 GMT). During the session, Brent reached its lowest level since January 3rd.

The price of U.S. crude fell $1.30, or 1.8%, to $72.95 per barrel and earlier reached $72.42 per barrel, the lowest level since late December.

The Energy Information Administration said that distillate stockpiles in the United States climbed by 6.2 million barrels, which was much greater than the projected rise of 2.2 million barrels. Rather than the anticipated increase of 2.7 million barrels, gasoline stocks increased by 5.3 million barrels.

The rise in gasoline stocks counterbalanced the loss of 5.2 million barrels in oil stocks. The American Petroleum Institute recorded a crude stock depletion of around 6.4 million barrels, according to market sources. [API/S] [EIA/S]

China's announcement of the most substantial modifications to its anti-COVID system since the start of the epidemic provided some support for prices, while Russia's deputy foreign minister was quoted by RIA as expressing alarm over a buildup of oil ships in the Bosphorus Strait.

According to statistics, China's crude oil imports in November surged by 12 percent year-over-year to their highest level in 10 months.

Futures for Brent went into oversold territory, while futures for WTI were close. Brent dropped below $80 on Tuesday for just the second time in 2022, erasing the year's gains that had put prices close to the all-time high of $147 in March, as a result of Russia's invasion of Ukraine.

On Tuesday, industry sources reported that at least 20 oil tankers queuing off the coast of Turkey will experience additional delays en route from Russia's Black Sea ports to the Mediterranean as operators struggle to comply with new Turkish insurance restrictions imposed in advance of a G7 price cap on Russian oil.

"If confidence in ongoing Russian oil supply contributed in any way to the recent decline, it was definitely misplaced. The delay of tankers in Turkish waters is a clear illustration of this "Tamas Varga of oil trader PVM stated.

The daily Vedomosti reported on Wednesday that Russia is mulling actions such as prohibiting oil deliveries to some nations in response to the price restriction set by Western powers.

Claudio Galimberti, senior vice president at Rystad Energy, stated, "There is still a great lot of uncertainty in the markets today," adding that Russia's crude oil production may not decrease as much as projected.

However, big U.S. institutions' fears about the potential of a recession next year weighed strongly.

According to Dennis Kissler, senior vice president of trading at BOK Financial, the net long position of speculative funds is at its lowest level in six years due to the recent liquidation of famous funds.