On Wednesday, the market’s crude oil grades fell to their lowest levels this year, wiping out all of the gains made since Russia’s invasion of Ukraine.
Brent futures fell $2.18, or 2.8 percent, to $77.17 per barrel, while US West Texas Intermediate (WTI) futures fell $2.24, to $72.01 per barrel.
Following the launch of a “special operation” in Ukraine a month earlier, oil surged to nearly $140 per barrel in March, close to an all-time high.
The market has been steadily declining recently, as economists anticipate weaker global growth, owing in part to high energy costs.
Despite a drop in crude stocks, the situation worsened on Wednesday with larger-than-expected increases in US fuel inventories.
The US Energy Information Administration (EIA) reported a 5.2 million barrel inventory decline for the week ending December 2, compared to a 12.6 million barrel draw estimated for the previous week, which sent prices higher at the time.
The American Petroleum Institute estimated another weekly crude inventory draw for the week ending December 2 at 6.43 million barrels a day before the EIA released its report.
Meanwhile, the EIA reported a fuel inventory build and another increase in middle distillate stocks for the week ending December 2. In the week ending December 2, gasoline (petrol) inventories increased by 5.3 barrels, with production averaging 9.1 million barrels per day, compared to a build of 2.8 million barrels the previous week and a production rate of 9.4 million barrels per day.
Prices are also falling as traders become less concerned about the potential consequences of the G7 and EU price cap on Russian oil.
They appear to have assumed that it would have no significant impact on oil availability and are selling crude.
Analysts also point out that Russian oil is already trading close to the price cap, so it shouldn’t make much of a difference in revenue, but it’s worth noting that Russia has stated that it will not sell oil to countries that enforce the price cap, which means that supply of Russian oil, in particular, may become tight for some importers.
In response to the G7 price cap, Russia has threatened to set a floor price for its oil, which may complicate matters further.
China, the world’s largest crude importer, announced the most significant changes to its anti-COVID regime since the outbreak began. According to data, the country’s crude oil imports increased 12% year on year in November, reaching their highest level in ten months.
Nonetheless, warnings from major US banks about a possible recession next year weighed on the commodity’s value.
