Crude oil futures saw a notable decline on Wednesday, driven by an unexpected surge in US crude inventories that outweighed persistent supply concerns from key producing regions. Brent crude futures fell 93 cents, or 0.86%, to settle at $107.82 a barrel. Meanwhile, US West Texas Intermediate (WTI) futures dropped 97 cents, or 0.92%, to $104.86 a barrel.
Both benchmarks had experienced gains exceeding $3 on Tuesday, reaching their highest levels since May 19, amid anxieties over potential supply disruptions.
US Inventories Bolster Price Drop
The primary catalyst for Wednesday's price dip was data from the American Petroleum Institute (API), which indicated a substantial build in US crude, gasoline, and distillate inventories last week. Crude inventories alone rose by 7.1 million barrels in the week ended September 11. This increase sharply contrasted with analysts' expectations, who, according to a Reuters poll, had predicted a 1.6 million-barrel draw.
Haitong Futures noted that the unexpected increases in gasoline and diesel inventories further contributed to the downward pressure on prices, even as the underlying tightness in the global crude market remained a factor.
Saudi Supply Concerns Persist
Despite the US inventory build, global supply risks continue to loom large. In Saudi Arabia, oil loadings at the Yanbu port remain suspended following the kingdom's shutdown of the East-West pipeline. This shutdown occurred after an attack by Yemen’s Iran-aligned Houthis on Friday.
The 1,200-km pipeline is crucial, capable of rerouting approximately 4 million barrels per day – roughly 4% of global supply – to the Red Sea port. While US Energy Secretary Chris Wright told CNBC that crude flows through the pipeline should resume within days, with US military assistance, estimates for the pipeline's downtime vary. Some sources suggest repairs could take five to six weeks, while others anticipate partial pumping could restart sooner.
Libyan Disruptions Add to Global Uncertainty
Further exacerbating supply concerns are disruptions in Libya. The National Oil Corporation (NOC) announced the suspension of operations at three oil fields. This action followed protesting members of the Petroleum Facilities Guard shutting a valve on the Hamada-Zawiya crude export pipeline. Despite these localized issues, NOC Chairman Massoud Suleman affirmed that Libya's overall oil production remained stable at around 1.4 million barrels per day.
Overall, while the surprise build in US inventories provided immediate downward pressure on crude prices, the persistent supply risks from Saudi Arabia and the uncertainty surrounding the East-West pipeline's return to normal operations continue to keep the market on edge.