Oil slips on U.S. stock build, trading in narrow range

Despite a significant increase in U.S. crude stockpiles on Thursday, oil prices remained constrained as expectations for a revival in China demand remained high.

Brent crude futures had dropped 36 cents, or 0.42%, to $85.02 per barrel. WTI crude futures for the United States were down 29 cents, or 0.37%, at $78.30.

Crude oil prices in U.S. stocks were under pressure last week because of a larger-than-anticipated build. According to the Energy Information Administration (EIA), on Wednesday, stocks increased to their highest level since June 2021.

The build was largely because of a data adjustment, which analysts said muted the impact on oil prices.

“This week, Brent failed once more to get above the 100-day moving average. The U.S. has a significant oil build, which keeps prices under pressure “said Giovanni Staunovo, an analyst at UBS.

While WTI has varied between $72 and $83 since December, the Brent benchmark has fluctuated within a $80-$90 per barrel range for the previous six weeks.

Oil prices are “very volatile right now, with traders having a lot to take in,” OANDA analyst Craig Erlam wrote in a note, citing Russia’s 500,000 bpd reduction in oil production in March, a robust Chinese economic recovery, and an unreliable outlook for the world economy.

According to the International Energy Agency (IEA), China will account for almost half of the increase in world oil consumption this year due to loosening COVID-19 restrictions.

On the supply side, the market is closely monitoring Russian oil production.

According to oil broker PVM’s Tamas Varga, it is unclear how international sanctions will effect the nation’s oil production or how far an invader would go to use oil as coercion.

Just 160,000 bpd less Russian oil was exported in January than it had been prior to the Ukraine conflict, but the IEA predicted that approximately 1 million bpd of production will be shut down by the end of the first quarter.

The market will look for economic clues from a host of Fed and ECB officials due to speak on Thursday.

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