Salem Radio Network News Sunday, May 22, 2022

Business

Oil drops as investors scoop up profits after U.S. inventory build

By Yuka Obayashi

TOKYO (Reuters) -Oil prices fell on Friday, after rising to seven-year highs this week, as investors took profits after a build in U.S. crude and fuel inventories, though overall sentiment remained solid due to concerns over tight supply and geopolitical risks.

Brent crude futures dropped $1.52, or 1.7%, to $86.86 a barrel by 0606 GMT. The contract earlier fell by as much as 3%, the most since Dec. 20. The global benchmark touched $89.50 a barrel on Thursday, its highest since October 2014.

U.S. West Texas Intermediate (WTI) crude futures slid $1.66, or 1.9%, to $83.89 a barrel. The contract earlier fell as much as 3.2%, also the most since Dec. 20, after rising to its highest since October 2014 on Wednesday.

The recent rally in crude prices appeared to run out of steam on Thursday when Brent and WTI ended the trading session with slim losses, but both benchmarks have gained more than 10% so far this year.

“An unexpected increase in U.S. crude stockpiles prompted investors to take profits,” said Tatsufumi Okoshi, senior economist at Nomura Securities, adding the recent rally has been overdone.

“Still, losses were limited as expectations that supply tightness would continue amid recovering demand and geopolitical tensions between Russia and Ukraine and in the Middle East kept investors cautious about selling,” he said.

Gasoline inventories in the United States, the world’s biggest oil consumer, rose by 5.9 million barrels to their highest since February 2021, according to the U.S. Energy Information Administration (EIA). Crude stockpiles rose by 515,000 barrels last week, against industry expectations.

The EIA also reported a slight decline in refinery runs, indicating lower demand for crude.

“Slumping stock markets amid concerns that the Federal Reserve may aggressively move to raise rates this year also weighed on sentiment”, said Chiyoki Chen, chief analyst at Sunward Trading.

Oil supply concerns mounted this week after Yemen’s Houthi group attacked the United Arab Emirates, OPEC’s third-largest producer, while Russia, the world’s second-largest oil producer, has built up a large troop presence near Ukraine’s border, stoking fears of invasion.

However, the International Energy Agency (IEA) said on Wednesday that oil supply will soon overtake demand as some producers are set to pump at or above all-time highs, while demand holds up despite the spread of the Omicron coronavirus variant.

(Reporting by Yuka Obayashi; Editing by Christian Schmollinger and Kim Coghill)

Previous
Next

Editorial Cartoons

View More »

Bob Gorrell
Tue, May 10, 2022

X CLOSE