Despite a slight dip in the value of the US dollar, an OPEC vote to maintain its production cap, and an unusually bullish increase in US commercial oil stocks, global oil prices slumped sharply on Wednesday, hitting their lowest levels in a month.
It appeared as though the rubber band holding oil prices taut finally snapped after being stretched to its limits by consecutive rises in the past couple of weeks.
US West Texas Intermediate (WTI) crude plummeted by more than 5% to approximately $84.60 per barrel, while Brent crude also experienced a more than 5% drop, reaching around $86.20 per barrel.
Wednesday's significant declines brought the total loss over the last five trading days to approximately 9% for both crude oil varieties.
In its weekly survey, the US Energy Information Administration (EIA) reported a 2.2-million-barrel decrease in US oil inventories last week. However, petrol stocks saw an unexpected increase of 6.5 million barrels, surpassing market forecasts. This was especially surprising for petrol, as high prices discouraged drivers from refilling their tanks.
Additionally, after several weeks of declining inventories at the Cushing, Oklahoma storage hub, which serves as the delivery point for the WTI contract, the EIA reported a sudden increase in stocks. This alleviated concerns about low supply that could have hindered trading and sent prices soaring if a supply shortage had materialized.
The EIA's Crude Oil storage at the NYMEX delivery point at Cushing rose by 132,000 barrels, ending a seven-week streak of storage drawdowns at the country's largest storage facility.
"Oil stabilized yesterday after some selling earlier in the week, but Brent crude is back below $91/barrel as higher bond yields are expected to slow the economy and, thus, demand for oil," noted Saxo Bank.
The OPEC+ group concluded its ministerial meeting on Wednesday with no policy changes, maintaining its quotas unchanged, including one million barrels per day of production cuts from Saudi Arabia and 0.3 million bpd of cuts from Russia until the end of December.
The value of the US dollar saw a minor decrease, with the Aussie dollar trading around 63.30 US cents early Thursday in Asia, a slight improvement from Wednesday's levels of just over 63 US cents. The yen and the euro also strengthened slightly against the greenback as US bond yields dipped, with the 10-year security seeing a yield decrease to around 4.74%, down 6 basis points for the day.
Gold prices dropped by $5 an ounce to around $1,836 an ounce, Comex copper futures lost more than 1.1%, trading at $3.58 per pound. In Singapore, the price of 62% Fe iron ore fines futures slumped to $115.45, down from $118.25 a tonne on Monday.
On the contrary, Australian premium coking coal futures on the SGX reached a recent high of $350 a tonne on Wednesday, up from just over $322 a tonne on Monday. This marked the highest price for the commodity so far this year.