Crude Oil Market Update: Inventories, and Demand Dynamics

Key Highlights:

1. Price Movement: Crude oil futures fell due to the US Federal Reserve's slower interest rate cut projections for 2025, with Brent trading at $73.01 (-0.52%) and WTI at $69.64 (-1.33%).
2. Glencore Activity: Glencore acquired multiple Middle Eastern crude cargoes, supplying Asia after acquiring the Bukom refinery.
3. EIA Inventory Data: US crude oil inventories dropped by 0.9 million barrels, while gasoline inventories increased by 2.3 million barrels.
4. Global Demand Outlook: EIA reduced 2024 global oil demand growth by 300,000 bpd, citing slower economies in China and North America.

Crude Oil Prices Dip Amid Slower Interest Rate Cuts

• Crude oil futures traded lower on Thursday morning after the US Federal Reserve projected a slower pace of interest rate cuts in 2025.
• At 9.54 am on Thursday, February Brent oil futures were at $73.01, down by 0.52 per cent, and January crude oil futures on WTI (West Texas Intermediate) were at $69.64, down by 1.33 per cent. January crude oil futures were trading at ₹5942 on Multi Commodity Exchange (MCX) during the initial hour of trading on Thursday against the previous close of ₹5989, down by 0.78 per cent, and February futures were trading at ₹5930 against the previous close of ₹5977, down by 0.79 per cent.

Glencore’s Spot Oil Purchases Bolster Asian Supply

• Glencore Plc has emerged as an active buyer of spot oil cargoes from the Middle East this month, as the merchant starts procuring crude for the Bukom refinery in Singapore, according to traders.
• The company purchased three cargoes of Qatar’s Al-Shaheen grade and at least one of Abu Dhabi’s Upper Zakum, the traders said, asking not to be identified as they’re not authorized to speak publicly. The shipments will load in February, they added, and can arrive in Asia the same month, or in March.
• Glencore has been gearing up for a bigger role in the physical oil market after acquiring the Bukom refining and chemicals complex from Shell Plc earlier this year with Indonesia’s PT Chandra Asri Pacific. The refinery includes a 237,000 barrel-a-day crude distillate unit.

US Federal Reserve’s Interest Rate Projections Impact Crude Market

• As expected, the US Federal Reserve implemented an interest rate cut of 25 basis points on Wednesday. At the end of the two-day meeting on Wednesday, the US Central bankers projected they would make just two interest rate cuts of 25 basis points each in 2025. 
• Reduction in interest rates makes dollar-denominated commodities such as crude oil cheaper, boosting its demand in the world market. However, US Fed’s projection of fewer rate cuts created apprehensions about the potential impact on crude oil prices in the global market.
• Meanwhile, the official data from the US EIA (Energy Information Administration) showed decline in crude oil inventories in the US for the week ending December 13.
• According to US EIA, the US commercial crude oil inventories decreased by 0.9 million barrels for the week ending December 13, from the previous week. At 421 million barrels, US crude oil inventories were about 6 per cent below the five-year average for this time of year. 
• Total motor gasoline inventories increased by 2.3 million barrels from last week and were about 3 per cent below the five-year average for this time of year. 
• Total products supplied in the US over the last four-week period averaged 20.4 million barrels a day, up by 1.3 per cent from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.7 million barrels a day, up by 2.1 per cent from the same period last year.

Expert Opinion: Weaker Global Demand and Slower US Output Growth

US crude oil imports averaged 6.6 million barrels a day last week, an increase of 665,000 barrels a day from the previous week. Over the past four weeks, crude oil imports averaged about 6.5 million barrels a day, 2.1 per cent less than the same four-week period last year. Global oil demand growth projections for 2024 were reduced by 300,000 bpd to 1.2 million bpd, with weaker economic activity in China and North America as key factors, per the EIA. U.S. oil production forecasts for 2025 were also lowered to 13.54 million bpd, reflecting slower output growth.