Oil dipped ahead of a raft of data on the global market balance heading into the northern hemisphere winter, with OPEC and the International Energy Agency due to present monthly analyses.
West Texas Intermediate slipped toward $91 a barrel after ending 1.6% higher on Wednesday following softer-than-expected US inflation data. That gain came despite US government figures showing higher crude inventories and output. In addition, flows along the southern Druzhba network from Russia to central Europe resumed as a payment dispute was settled.
Crude retreated to a six-month low earlier this month as investors fretted that an economic slowdown would crimp worldwide energy demand. The drop has erased all the gains seen since Russia’s invasion of Ukraine in February even as sanctions on the world’s biggest energy exporter mounted.
“While the weaker-than-expected US CPI print provided a boost to risk assets, the strength in oil has been relatively short-lived,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. The restart of the Druzhba flows has eased some supply concerns, and the large build in US inventories won’t help sentiment, he added.
Earlier this month, the Organisation of Petroleum Exporting Countries and allies including Russia twinned a tiny rise in output with a warning that members have “severely limited” spare capacity. That remaining buffer should be used only with “great caution in response to severe supply disruptions,” it said.
The Paris-based IEA, which represents key industrialized consumers, has been sounding the alarm about an energy crunch as Russia cuts back on gas deliveries to Europe. In July, IEA Executive Director Fatih Birol said that a global squeeze on energy supply may yet get even worse.
The softer-than-expected US inflation print on Wednesday was driven in part by a marked decline in gasoline prices. Nationwide average retail pump prices are poised to decline back below $4 a gallon after peaking at a record above $5 in mid-June, according to data from auto club AAA.
The market’s recent easing is evident as widely-watched time differentials have narrowed. WTI’s prompt spread — the gap between its two nearest contracts — has shrunk to 71 cents a barrel in backwardation compared with $2.88 a month ago. The comparable measure for global benchmark Brent was at $1.22 a barrel, down by about two-thirds in the same period.
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