Oil prices fall as rising U.S. inventories reassert supply concerns
Melbourne. Oil prices fell on Wednesday, ending a multi-day streak of gains, as investors focused on oversupply risks after U.S. crude inventories rose more than expected amid a slump in demand caused by restrictions to halt the coronavirus spread.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell as much as 2.1% to $24.05 a barrel and were down 14 cents at $24.41 a barrel at 0201 GMT. WTI has snapped a five-day winning streak.
Brent crude LCOc1 futures were flat at $30.97 a barrel, told (Reuters.
Brent prices climbed 13.9% in the previous session, part of a six-day rise. Investors may be hesitant to increase their purchases of Brent as the contract has climbed too much over the past streak.
Brent’s relative strength index, a technical measure used to track the future’s trading momentum, was at 72.93 on Wednesday, indicating it is overbought after the recent gains.
WTI also slipped after a report showed U.S. crude inventories rose 8.4 million barrels last week, more than expected, according to data from the American Petroleum Institute late on Tuesday.
Oil prices had gained recently as European and Asian countries had ended their lockdowns to halt the coronavirus spread and as producers had axed supply after the demand crunch. But analysts cautioned the rebalancing of the market would be choppy.
“We’re talking about normalisation of supply and demand but we’ve got a long way to go,” said Lachlan Shaw, National Australia Bank’s head of commodity strategy.
“There are a lot of supply cuts that have come through. That combined with some early signs of demand lifting has meant the rate of inventory build is slowing.”
But analysts also pointed to comments by U.S. shale producer Diamondback Energy (FANG.O) saying it would consider reviving drilling plans if WTI held above $30 a barrel as a sign that producers will not want to shut in production for long.