By Yuka Obayashi and Trixie Yap
(Reuters) – Oil prices declined for a second day on Thursday after a big build in gasoline inventories in the U.S., the world's biggest oil consumer, although expectations of increased winter fuel demand and concerns about tight supplies moderated the decline.
Futures fell 8 cents to $76.08 a barrel at 0409 GMT. US West Texas Intermediate crude futures fell 11 cents to $73.21. Both prices were down about 0.1% from the previous session.
Both benchmarks fell more than 1% on Wednesday as a stronger dollar and a larger-than-expected increase in US fuel stockpiles weighed on prices.
Gasoline stocks rose by 6.3 million barrels last week to 237.7 million barrels, the US Energy Information Administration said Wednesday. Analysts polled by Reuters had expected a build of 1.5 million barrels. (EIA/S)
Distillate stockpiles rose by 6.1 million barrels in the week to 128.9 million barrels, against expectations for a 600,000-barrel increase.
But crude inventories fell by 959,000 barrels for the week, compared with analysts' expectations for a draw of 184,000 barrels.
“Increased US gasoline inventories led to sales, but the decline was slight due to winter demand in the northern hemisphere,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan (OTC:) Securities.
JPMorgan analysts expect January oil demand to increase by 1.4 million barrels per day year-on-year to 101.4 million bpd, primarily driven by “increased heating fuel consumption in the Northern Hemisphere”.
“Global oil demand is expected to remain strong throughout January, driven by colder-than-normal winter conditions that boosted fuel consumption, and the early start of travel activity in China over the New Year holidays,” analysts said. .
Although prices are falling, the structure of the Brent futures market shows that traders are more concerned about tightening supply at the same time that demand is increasing.
Brent's first-month premium on the six-month contract hit its highest since August on Wednesday. The extension of this backwardation, when futures for immediate supply are higher than futures for later delivery, indicates that supply is decreasing or demand is increasing.
Looking ahead, trends in Chinese demand, the incoming US administration and trade policies, and its stance on the Russia-Ukraine war will be the main focus, said Nissan Securities' Kikukawa, adding that traders are likely to hold off on taking large positions until President-elect Donald Trump Trump takes office on Jan. 20.