Oil Retreats from Multi-Year Highs Following U.S. Stock Build, Reports Reuters

By David Gaffen

Oil prices fell nearly 2% on Wednesday, pulling back from multi-year highs as an unexpected increase in inventories led buyers to pause after a period of significant gains.

According to the U.S. Energy Department, crude inventories in the United States rose by 2.3 million barrels last week, contrary to expectations for a slight decline of 418,000 barrels. Gasoline inventories also increased, while distillate stocks experienced only a modest decrease.

Brent crude reached $83.47 a barrel, its highest level since October 2018, but ultimately settled at $81.08, down $1.48 or 1.8%. Meanwhile, U.S. crude peaked at $79.78, marking its highest price since November 2014, before retreating to $77.43, a decline of $1.50 or 1.9%.

Gary Cunningham, director at Tradition Energy in Stamford, Connecticut, noted, "We saw some profit taking as oil had run up significantly."

The global benchmark price for Brent crude has surged over 50% this year, contributing to inflationary pressures that could hinder the recovery from the COVID-19 pandemic. Natural gas prices have reached record levels in Europe, and coal prices from major exporters have also surged to all-time highs.

This latest increase in crude prices has been supported by OPEC and its allies refraining from increasing output amidst concerns over tight energy supplies globally. On Monday, OPEC, along with Russia and other partners known as OPEC+, opted to continue their gradual output increase plan rather than boosting it further, despite calls from the United States and other consumer nations.

The market saw a slip late in the day after U.S. Energy Secretary Jennifer Granholm suggested the United States might address rising prices by potentially releasing oil from strategic reserves or considering a halt to crude exports. Following this news, oil prices fell slightly, although the decline was not severe. After ending a 40-year ban on crude exports in late 2015, the U.S. now exports over 3 million barrels daily. Cunningham remarked, "I don’t think we’re at a point where we want to limit exports of crude oil."

U.S. production has risen to 11.3 million barrels per day as it rebounds from storm-related shutdowns, approaching pandemic-era levels but still falling short of the record 13 million bpd set in 2019. As shale companies focus on delivering returns to investors, U.S. output has not made up for the reductions implemented by OPEC+.