Oil updates – Prices drop as rising inventories offset Russian output cuts

LONDON: Oil prices fell below $82 a barrel on Friday as rising inventories in the US and concerns over global economic activity offset the prospect of lower Russian exports.

Brent crude futures were down 57 cents, or 0.7 percent, at $81.64 a barrel by 1423 GMT, having risen by more than $1 earlier in the session.

West Texas Intermediate US crude futures were down 69 cents, or 0.9 percent, at $74.70.

On the anniversary of Russia’s invasion of Ukraine, benchmark Brent crude was about 15 percent lower than a year earlier. It hit a 14-year high of nearly $128 a barrel on Mar. 8, 2022.

Both benchmarks rose about 2 percent in the previous session on Russia’s plans to cut oil exports from its western ports by up to 25 percent in March, which exceeded its announced production cuts of 500,000 barrels per day.

US inventories are at their highest level since May 2021.

US crude stocks rose by 7.6 million barrels to about 479 million barrels in the week to Feb. 17, data from the US Energy Information Administration said.

And indications that Russian crude and refined products are accumulating on tankers floating at sea weighed further on the supply outlook.

JP Morgan said in a note on Friday that it sees short-term prices more likely to drift lower toward the $70s than rise “as global growth headwinds strengthen and excess ‘dark’ inventory exacerbated by a flooding of Russian oil is worked off.”

The bank also said it expects the Organization of the Petroleum Exporting Countries to cut production in order to limit oil price declines.

For the week, oil prices are largely flat, after the previous week’s declines of about 4 percent, weighed also by concerns about rising interest rates that could strengthen the dollar and curb fuel demand.

Minutes from the latest US Federal Reserve meeting indicated that a majority of officials remained hawkish on inflation and tight labor market conditions, signalling further monetary tightening.

The prospect of further rate hikes supported the dollar index, which was set for a fourth-straight week of gains. The index is now up about 2.5 percent for the month.

A firm dollar makes commodities priced in the greenback more expensive for holders of other currencies.