Crude prices eased on Thursday as oil infrastructure appeared to have escaped serious damage from the earthquake that devastated parts of Turkey and Syria, while U.S. inventories swelled and investors worried about Federal Reserve rate hikes.
Brent crude settled at $84.50 a barrel, losing 59 cents, or 0.7%. U.S. West Texas Intermediate (WTI) crude futures settled at $78.06 a barrel, down 41 cents, or 0.5%. Both benchmarks have gained more than 5% so far this week.
The earthquake, which has killed more than 19,000 people, initially sent oil prices higher on the prospect that the disaster would seriously damage pipelines and other infrastructure and displace crude from the global market for an extended period.
“We won’t be losing that supply for as long as we thought,” said John Kilduff, partner at Again Capital in New York.
BP Azerbaijan declared force majeure on Azeri crude shipments from the Turkish port of Ceyhan on Tuesday after the quake struck early on Monday. Azeri oil continues to flow there via pipeline, BP Azerbaijan said on Thursday.
A strong U.S. jobs report raised fears that the U.S. Federal Reserve would continue to aggressively hike rates to cool inflation, pressuring risk assets like oil and equities.
U.S. crude stocks rose last week to 455.1 million barrels, their highest since June 2021, the Energy Information Administration reported on Wednesday, which also pushed oil prices lower. Gasoline and distillate inventories also rose last week, the EIA said, during unseasonably mild winter months.
The prospect of stronger demand from China provided some support to oil prices, as the world’s second largest oil consumer ended more than three years of stringent zero-COVID policy.
“We expect Chinese oil consumption to increase by around 1.0 million barrels a day this year, with strong growth emerging as early as late in Q1,” analysts from ANZ bank wrote in a note.
“Overall, this should push global demand up by 2.1 million barrels a day in 2023.”
Brent’s front-month loading contract rose to a $3-a-barrel premium over contracts six months out, a market structure called backwardation, which indicates traders seeing tight current supply.
A weaker U.S. dollar, which typically trades inversely with oil, also helped limit losses in crude prices. The dollar index fell 0.7% to 102.74.