Bearish US Data, Crude Stocks Build, Oil $1 Down

Fears of a recession caused oil futures to drop as much as $1 on Thursday. A dramatic loss in U.S. retail sales and factory production clouded the outlook for demand, and industry data showing a surprising increase in U.S. crude stocks added to the pressure.

After losing about 1% on Wednesday, Brent crude futures last traded at $84.16 per barrel, down 82 cents, or 1%. Also falling by 90 cents, or 1.1%, to $78.58 per barrel, were U.S. West Texas Intermediate (WTI) oil futures.

He fell apart. As fears of another recession grow, U.S. economic figures cast doubt on the future of (oil) demand. According to Tina Teng, an analyst at CMC Markets, “Risk-off attitude has sent the growth-sensitive commodities, notably oil, down.

Profit-taking “could possibly be a factor that pressured oil prices ahead of the U.S. major tech earnings,” according to the report.

With losses in sales of cars and a variety of other commodities, December retail sales in the United States declined by the most in a year, placing consumer spending and the economy as a whole on a slower growth path going into 2023.

The United States manufacturing output also decreased more than forecast in December, marking its worst decline in nearly two years as rising borrowing rates harmed consumer demand for goods.

Despite indicators that inflation has peaked and the pace of the economy is slowing, Federal Reserve officials said rates still needed to increase above 5%.

According to ANZ Research analysts, “this elevated the spectre of a recession, with risk appetite falling as a result,” in a client note.

Data from the American Petroleum Institute revealed an increase in U.S. crude oil stocks of around 7.6 million barrels in the week ending January 13, according to market sources, adding to the gloom.

By the average estimate of the nine analysts surveyed by Reuters, crude inventories had decreased by nearly 600,000 barrels.

It’s the second week in a row that inventories have grown significantly, thanks to the significant build.

However, analysts had anticipated a 120,000-barrel increase in distillate stockpiles, which include diesel and heating oil, but instead, they saw a decrease of approximately 1.8 million barrels.

Due to Monday’s United States Martin Luther King Jr. holiday, the API report was postponed by one day.

Thursday will see the release of the government’s weekly inventory report from the Energy Information Administration.

Since aggressive rate increases are still in the cards, the U.S. dollar increased, which reduced demand for oil because a stronger dollar makes commodities more expensive for those holding other currencies.

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