Oil prices were little changed on Wednesday after erasing earlier losses as the market discounted a big build in U.S. crude stocks due to a data adjustment, while forecasts for higher global oil demand growth were supportive.
Brent futures rose 5 cents, or 0.1 per cent, to $85.63 a barrel by 1:58 p.m. EST (1858 GMT), while U.S. West Texas Intermediate (WTI) crude fell 2 cents to $79.04.
U.S. crude stockpiles jumped by 16.3 million barrels last week to 471.4 million barrels, their highest since June 2021, the U.S. Energy Information Administration (EIA) said.
That was much bigger than the 1.2 million-barrel increase analysts forecast in a Reuters poll and compares with the 10.5 million-barrel increase shown in data from the American Petroleum Institute (API), an industry trade group.
But analysts said an unusually large crude oil supply adjustment of 2.0 million barrels per day (bpd) in the week ended Feb. 10 from an adjustment of minus 700,000 bpd in the prior week ended Feb. 3 contributed to the outsized build.
“Once everyone realized the adjustment threw off the EIA data, skepticism about the big (crude storage) build crept into the market,” said John Kilduff, a partner at investment advisory Again Capital LLC in New York. “It’s a one-off.”
Lending additional support to crude prices was a report from the International Energy Agency (IEA), which raised its forecast for 2023 oil demand growth and said restrained OPEC+ production could bring a supply deficit in the second half.
OPEC+ includes the Organization of the Petroleum Exporting Countries (OPEC) and other oil suppliers including Russia.
The IEA said China will make up nearly half of this year’s oil demand growth after it relaxed its COVID-19 curbs.
It also said that about 1 million bpd of production from Russia will be shut in by the end of the first quarter, citing a European ban on seaborne imports and a Group of Seven (G7) price cap over the invasion of Ukraine.
The G7 is a group of seven countries, including Canada, France, Germany, Italy, Japan, Britain and the United States.
On Tuesday, OPEC also raised its projection for global oil demand growth and pointed to a tighter market in 2023.
Weighing on crude prices earlier in the day was U.S. inflation data and remarks by central bank officials that have been perceived as indications that interest rates will go higher for longer.
U.S. retail sales increased by the most in nearly two years in January after two straight monthly declines as Americans boosted purchases of motor vehicles and other goods, pointing to the economy’s continued resilience despite higher borrowing costs.
Federal Reserve officials said the U.S. central bank will need to maintain gradual increases to interest rates to beat inflation and suggested that price pressures driven by a hot jobs market could push borrowing costs higher than previously expected.
Higher interest rates can slow the economy by making it more expensive for consumers and businesses to borrow money.