Oil Prices Retreat on Increased Supplies and Record Production

Oil futures retreated early on Thursday following a build in U.S. petroleum supplies and record domestic production. This pullback comes after a rally sparked by disrupted shipments in the Red Sea due to drone and missile attacks by Iran-backed Houthi rebels.

Price Action

  • West Texas Intermediate crude for February delivery fell 22 cents, or 0.3%, to $74 a barrel on the New York Mercantile Exchange.
  • February Brent crude, the global benchmark, was down 25 cents, or 0.3%, at $79.45 a barrel on ICE Futures Europe.

Market Drivers

According to Stephen Innes, managing director at SPI Asset Management, the re-emergence of the geopolitical risk premium for oil has been notable. However, he noted that the market’s primary focus remains on the constantly shifting dynamics of supply and demand.

Shippers have suspended shipments through the Red Sea due to the ongoing attacks, prompting the U.S. to announce a naval coalition to combat these actions.

Although Brent and WTI prices rose for the third consecutive session on Wednesday, reaching their highest levels since November 30, they pulled back after the Energy Information Administration released data showing an increase in U.S. crude, gasoline, and distillate supplies last week.

Furthermore, domestic petroleum production reached a new record high of 13.3 million barrels a day, based on EIA data dating back to 1984.

Alongside concerns about Chinese demand, apprehensions sparked by Wednesday’s EIA report amplified worries about domestic demand, particularly regarding the rise in U.S. refined-fuel supplies, as highlighted by Innes.

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