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Oil Fluctuates Amid Crude Inventory Decline and Significant Fuel Builds

by Krystal

Crude oil prices experienced fluctuations today following the Energy Information Administration‘s (EIA) report, which showed an estimated decline in crude inventories of 1.4 million barrels for the week ending December 6. In contrast, the EIA’s data revealed significant inventory increases in fuel products.

The drop in crude inventories this week was much smaller compared to the 5.1 million-barrel draw reported the previous week, which had initially pushed prices higher. However, these gains quickly faded amid persistent concerns about weak global demand growth.

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One day before the EIA’s report, the American Petroleum Institute (API) had estimated a slight inventory increase of 499,000 barrels for the same week.

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In fuel products, gasoline inventories grew by 5.1 million barrels in early December, with production averaging 10 million barrels per day. This was a sharp rise compared to the 2.4 million-barrel increase the previous week when production was lower at 9.5 million barrels per day.

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Meanwhile, middle distillates saw a 3.2 million-barrel increase in inventories for the first week of December, with daily production averaging 5.2 million barrels. This build was slightly smaller than the 3.4 million-barrel increase observed the previous week, when production averaged 5.3 million barrels per day.

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Earlier in the day, oil prices were trending upward due to trader optimism about potential Chinese economic stimulus measures and expectations that the U.S. Federal Reserve would announce an interest rate hike next week. However, the rate hike decision has become uncertain after November’s inflation data showed prices had risen by 2.7% compared to a year ago, exceeding the Fed’s target of 2%. Despite this, traders still expect the Fed to implement a rate increase.

The earlier gains in oil prices were limited, though, by a lack of specific details regarding China’s stimulus plans, which were only broadly referenced as looser monetary policy. However, some support came from new import data out of China, which showed a 14% increase in crude oil imports in November compared to the previous year.

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