Oil Prices Drop as Markets Slide, US Stockpiles Rise

On Wednesday, oil prices declined despite a broader selloff in global financial markets, which highlights the underlying tensions regarding economic and fuel demand growth, as well as the strong US dollar and reports of elevated US crude stockpiles, raising concerns.

Brent crude futures decreased by 36 cents, or 0.56%, to $64.08 per barrel by 0221 GMT. Meanwhile, U.S. West Texas Intermediate crude declined by 40 cents, or 0.66%, to $60.16. Both contracts continued their decline from Tuesday.

On Wednesday, following an overnight decline on Wall Street, oil markets fell as part of the broader slump in equity markets, due to concerns that stock valuations are becoming stretched, particularly for companies tied to artificial intelligence.

Due to the stronger greenback and risk-off sentiment, the U.S dollar is stronger against its peers, making dollar-dominated oil more expensive and in demand for holders of any other currencies.

“Crude oil is trading lower … as risk sentiment shifted sharply negative, boosting the haven U.S. dollar, both of which weighed on the crude oil price,” IG market analyst Tony Sycamore stated in a note.

On Tuesday, according to market sources citing API figures and the American Petroleum Institute, prices were also under pressure, and US stockpiles rose by 6.52 million barrels by October 31.

The Organisation of the Petroleum Exporting Countries (OPEC) and its allied producers, also known as OPEC+, agreed to increase output by 137,000 barrels per day in December.

According to the LSEG analyst, the group has further decided to increase the first quarter; the pause was unlikely to offer meaningful support to the November and December prices.

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OPEC only increased its output by 30,000 bpd in October compared to the previous month. The planned OPEC+ increases were counterbalanced by decreases in Nigeria, Libya, and Venezuela.