Oil prices fell on Thursday, giving up some of the recent strong gains on expectations of slower economic recovery and speculation that the market’s strength could tempt producers like Saudi Arabia to reduce output by less.
Brent crude fell 35 cents, or 0.6%, to $61.12 a barrel, as of 0805 GMT, after touching its highest since January 2020 on Wednesday.
The market has been driven higher as the Organisation of Petroleum Exporting Countries and its allies, known as OPEC+, reduced output and coronavirus vaccine rollouts fired up hopes of a recovery in demand.
U.S. West Texas Intermediate crude futures slid 34 cents, or 0.6%, to $58.34 a barrel.
“Benchmark crude oil futures fell…as investors tapped the brakes on the run in crude prices after taking in tepid U.S. inflation data and comments from the Federal Reserve chief affirming the outlook for a slow recovery,” Avtar Sandu, senior commodities manager at Phillip Futures, wrote in a note.
Asian shares rested at record highs on Thursday as investors digested recent meaty gains, while bulls were sustained by the promise of endless free money after a benign reading on U.S. inflation and a dovish Federal Reserve outlook. [MKTS/GLOB]
Brent rose during the previous nine sessions, its longest sustained period of gains since January 2019. Wednesday had marked the eighth daily rise for U.S. crude.
Some analysts say prices have moved too far ahead, and could tempt producers to open their taps a bit more.
“Despite finding support for the large draw in the U.S. crude stockpiles… oil prices couldn’t hold onto its gains possibly on the expectation that Saudi Arabia could roll back their unilateral Feb/Mar production cuts and that OPEC could signal more production coming back online at the March meeting given the sizzling recovery in oil prices,” said Stephen Innes, chief global markets strategist at brokerage Axi.
U.S. crude stockpiles last week fell for a third straight week, dropping 6.6 million barrels to 469 million barrels, their lowest since March, according to the Energy Information Administration. Analysts in a Reuters poll had forecast a 985,000-barrel increase.
Crude has jumped since November as governments kicked off vaccination drives for COVID-19 while putting in place large stimulus packages to boost economic activity, and the world’s top producers kept a lid on supply.
Top exporter Saudi Arabia is unilaterally reducing supply in February and March, supplementing cuts agreed by other members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+.
Reporting by Naveen Thukral; Editing by Simon Cameron-Moore and Christian Schmollinger