Oil prices end week flat as US stockpiles rise and Russia cuts output

US crude inventories rose by 7.6 million barrels the previous week

Drilling rigs in Texas. US crude exports rose to 4.6 million barrels per day in the week ending on February 17. Reuters
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Oil prices rose for the second consecutive day on Friday but ended the week flat as US stockpiles rose and Russia cut output.

Brent, the benchmark for two thirds of the world’s oil, settled 1.16 per cent higher at $83.16 at the close of trading. West Texas Intermediate, the gauge that tracks US crude, closed up 1.23 per cent at $76.32 a barrel.

Brent prices rose 0.2 per cent over the previous week and WTI was little changed.

“The short-term crude demand outlook appears to be improving, while stockpiles continue to rise,” said Edward Moya, a senior market analyst at Oanda.

US crude exports rose to 4.6 million barrels per day in the week ending on February 17, up about 46 per cent from a week earlier, according to the US Energy Information Administration.

Meanwhile, US crude stocks — an indicator of petroleum demand — increased by 7.6 million barrels last week, the EIA said.

“It looks like oil has been beaten up enough. It doesn’t seem like recession risks [would] feel real until closer to the summer, so the oil market should be relatively tight until then,” said Mr Moya.

Brent has changed little since since the previous Friday’s closing on rising US crude inventories and fears of more aggressive interest rate increases by central banks.

Minutes released by the US Federal Reserve from its latest meeting showed that policymakers expect continuing interest rate increases to bring inflation back down to their long-term goal of 2 per cent.

Most officials agreed to reduce the pace of rate increases to 25 basis points but a few recommended an increase of 50 bps to bring the Fed Funds rate to a level they consider “sufficiently restrictive”.

This month’s US economic data pointed to stubborn inflation in the world’s largest economy, making a case for larger interest rate raises.

After its February meeting, the Fed raised interest rates by 25 bps — the eighth increase since March 2022. The Fed's next meeting is scheduled for March 21 to March 22.

Expectations of further interest rate raises have also strengthened the dollar.

The US Dollar Index — a measure of its value against a weighted basket of major currencies — has gained about 3 per cent over the last month. It was marginally down at 104.56 on Friday.

A stronger dollar makes dollar-denominated oil more expensive for holders of other currencies.

The US economy grew slightly less than estimated at 2.7 per cent in the fourth quarter of 2022, the Commerce Department said on Thursday, citing a downward revision to consumer spending.

The world’s largest economy grew 3.2 per cent in the third quarter.

“The deceleration in real GDP … primarily reflected a downturn in exports and decelerations in consumer spending, non-residential fixed investment and state and local government spending,” the department said.

The prospect of a bigger Russian supply cut also supported prices.

Moscow plans to cut oil exports from its western ports by up to 25 per cent in March, compared with February, Reuters reported, citing Russian oil sources.

Russia, the world’s second-largest oil producer after Saudi Arabia, had previously said it would cut production by 500,000 bpd, or about 5 per cent of the output, next month after the West imposed price caps on its crude and refined products on February 5.

Updated: February 26, 2023, 7:58 AM