Oil falls as investors scoop up profits after U.S. inventory build

Brent Oil  was trading 1.66% down at  $86.95.

Oil prices fell on Friday, after rising to seven-year highs this week, as investors took profits following a build-up in U.S. crude and fuel inventories, though overall sentiment remained solid due to concerns over tight supply and geopolitics.

Brent crude futures were down $1.00, or 1.1%, to $87.38 a barrel by 0747 GMT. The contract earlier fell by as much as 3%, the most since Dec. 20. A day earlier the global benchmark touched $89.50 a barrel, its highest since October 2014.

U.S. West Texas Intermediate (WTI) crude futures slid $1.16, or 1.4%, to $84.39 a barrel. The contract earlier fell as much as 3.2%, also the most since Dec. 20, after rising to its highest since October 2014 on Wednesday.

The recent rally in crude prices appeared to run out of steam on Thursday when Brent and WTI ended the trading session with slim losses, but both benchmarks have gained more than 10% this year and are headed for a fifth straight weekly gain.

“An unexpected increase in U.S. crude stockpiles prompted investors to take profits,” said Tatsufumi Okoshi, senior economist at Nomura Securities, adding the recent rally has been overdone.

“Still, losses were limited as expectations that supply tightness would continue amid recovering demand and geopolitical tensions between Russia and Ukraine and in the Middle East kept investors cautious about selling,” he said.

Gasoline inventories in the United States, the world’s biggest oil consumer, rose by 5.9 million barrels to their highest since February 2021, according to the U.S. Energy Information Administration (EIA).

Crude stockpiles rose by 515,000 barrels last week, against industry expectations.

The EIA also reported a slight decline in refinery runs, indicating lower demand for crude.

“Slumping stock markets amid concerns that the Federal Reserve may aggressively move to raise rates this year also weighed on sentiment,” said Chiyoki Chen, chief analyst at Sunward Trading.

Brent crude futures fell 49 cents, or 0.6%, to $87.95 a barrel as of 0740 GMT, after falling more than $1 earlier. The global benchmark rose to $89.17 a barrel on Wednesday, its highest since October 2014.

U.S. West Texas Intermediate (WTI) crude futures for February delivery were down 6 cents, or 0.1%, at $86.90 a barrel, after dropping nearly $1 earlier. WTI climbed to as much as $87.91 on Wednesday, the highest since October 2014.

The February WTI contract will expire on Thursday and the most-actively traded contract, for March delivery, is at $85.41 a barrel, down 0.5%.

“The International Energy Agency said global oil demand is on track to hit pre-pandemic levels,” analysts at ANZ bank said in a note.

“Shorter-term supply disruptions are also helping tighten markets. Brent crude rallied sharply after reports a key oil pipeline running from Iraq to Turkey was knocked out by an explosion.”

However, the flow of crude oil through the Kirkuk-Ceyhan pipeline has resumed, after it was halted on Tuesday due to a blast near the pipeline in the southeastern Turkish province of Kahramanmaras, officials said on Wednesday.

Supply concerns have mounted this week after Yemen’s Houthi group attacked the United Arab Emirates, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC). Meanwhile Russia, the world’s second-largest oil producer, has built up a large troop presence near Ukraine’s border, stoking fears of invasion and subsequent supply uncertainties.

Underpinning oil prices is the broad post-coronavirus pandemic recovery in demand for fuel.

OPEC officials and analysts say that an oil rally may continue in the next few months, and prices could top $100 a barrel as demand shrugs of the spread of the Omicron COVID-19 variant.

OPEC+, which groups the cartel with Russia and other producers, is struggling to hit a monthly output increase target of 400,000 barrels per day (bpd).

U.S. crude and gasoline stocks rose while distillate inventories fell last week, according to market sources citing American Petroleum Institute figures on Wednesday.

RSI Stood at 66.851, the current price is trading Above  the Moving Averages  20 & 50  . So, a  Buy trade can be executed with the following target and stop-loss:

TRADE SIGNAL-Brent OilBuy: 86.00, TARGET:-92.00, STOP LOSS:- 83.00.

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