Oil futures slipped to begin March, after an industry group reported another large jump in U.S. crude inventories, outweighing a round of upbeat data on economic activity in China.
Price action
- West Texas Intermediate crude for April delivery CL00, -0.62% CL.1, -0.62% CLJ23, -0.62% fell 69 cents, or 0.9%, to $ 76.36 a barrel on the New York Mercantile Exchange.
- May Brent crude BRN00, -0.35% BRNK23, -0.35%, the global benchmark, was off 53 cents, or 0.6%, to $ 82.92 a barrel on ICE Futures Europe.
- Back on Nymex, April gasoline RBJ23, +0.36% fell 0.2% to $ 2.637 a gallon, while April heating oil HOJ23, +0.51% rose 0.3% to $ 2.814 a gallon.
- Natural gas for April delivery NGJ23, +0.76% declined 0.3% to $ 2.853 per million British thermal units.
Market drivers
The American Petroleum Institute late Tuesday reported a 6.2 million barrel increase in U.S. crude supplies last week, according to a source citing the figures. Gasoline inventories were down 1.8 million barrels, while distillates fell 341,000 barrels.
Official figures from the Energy Information Administration are due Wednesday morning. On average, analysts forecast a climb of 350,000 barrels in crude inventories for the week ending Feb. 24, according to survey conducted by S&P Global Commodity Insights. They also forecast supply declines of 300,000 barrels for gasoline and of 700,000 barrels for distillates.
If the API rise is confirmed by the EIA figures, it will mark the 10th consecutive week of rising inventories in the U.S., with total crude stocks moving further up compared to the five-year average at this point in the season, noted analysts at ING, in a Wednesday note.
Meanwhile, China’s official manufacturing purchasing managers index rose to 52.6 in February from January’s 50.1, according to the National Bureau of Statistics. The result topped the 50.5 expected by economists polled by The Wall Street Journal.
The official nonmanufacturing PMI, which covers both service and construction activity in the country, increased to 56.3 in February, compared with 54.4 in January, said the statistics bureau.
Meanwhile, Russia was set to cut crude production in March and limit exports in response to new rounds of price caps and sanctions imposed by Western nations after its invasion of Ukraine just over a year ago.
Crude prices fell in February, with pressure tied in part to shifting market expectations for Federal Reserve interest rate rises as the central bank struggles to bring down inflation. Expectations for higher rates boosted Treasury yields and lifted the U.S. dollar. A stronger dollar can be a weight on commodities priced in the currency, making it more expensive to users of other currencies.
“Oil prices are trading near the lower end of its two-week range despite increasing war risks and Russia’s plan to cut production levels beginning this month. Rising yields and a strong dollar will likely continue to lean on oil prices with spot poised to weaken further,” said Peter Cardillo, chief market economist at Spartan Capital, in a note. “We continue to look for spot oil to trade below the $ 70 area in the near future,” he said.