Brent crude fell below $75 per barrel on Wednesday, shedding $1.59 or 2.09 per cent to trade at $74.61 per barrel as a large build in US crude stockpiles signalled weaker demand.
Also, the US West Texas Intermediate (WTI) crude was down $1.67 or 2.3 per cent to quote at $71.03 per barrel as the US Energy Information Administration said yesterday that crude oil inventories rose sharply last week in the world’s largest producer as refiners facing soft gasoline (petrol) demand did maintenance work.
Inventories in the US saw a colossal build of 8.7 million barrels during the week ending January 31 after the American Petroleum Industry (API) issued its latest estimates on crude oil and crude oil products inventories showing that crude oil inventories had risen by a whopping 5.025 million barrels for the week on Tuesday.
For total motor gasoline (petrol), the EIA estimated that inventories rose by 2.2 million barrels for the week to January 31, with production averaging 9.2 million barrels daily. This compares with an inventory rise of 3.0 million barrels for the previous week and an average daily production of 9.2 million barrels daily.
For middle distillates, the EIA estimated an inventory fall of 5.5 million barrels for last week, with production averaging 4.6 million barrels daily. This compares to an inventory loss of 5 million barrels for the week prior when production stood at an average of 4.7 million barrels daily.
Meanwhile, worries about a new China-US trade war fueled fears of softer economic growth.
On Tuesday, China announced tariffs on imports of U.S. oil, liquefied natural gas and coal in retaliation for US levies on Chinese exports.
Market analysts noted that China putting a tariff on US imports will reduce the demand for those commodities, which need to be redirected into another market.
Iran has also urged its fellow members in the Organisation of the Petroleum Exporting Countries (OPEC) to unite against possible US sanctions after President Trump said he would restore the maximum pressure campaign on Iran that he enacted in his first term.
If this happens, the resulting supply squeeze could sustain the upward momentum in oil prices, particularly amid slower than expected supply adjustments from OPEC+ producers.