The price of oil fell by about 0.3% after jumping 2% yesterday amid Middle East supply concerns and the shutdown of a top Libyan oilfield.
Today's oil correction was driven by concerns about weak economic growth. Luis de Guindos, Vice-President of the European Central Bank, warned that the eurozone economy may have been in recession in the 4th quarter. "The latest data point to an economic downturn in December, confirming the possibility of a technical recession in the second half of 2023 and weak prospects for the near term. In general, the future remains uncertain, and the prospects tilted to the downside," the policymaker said, adding that the economic weakness is widespread: construction and manufacturing industries have been particularly hard hit, and a downturn in the service sector is likely to follow in the coming months.
The negative dynamics of the US currency provided some support for oil. The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.15% to 102.42.
Market participants also analyzed a report on petroleum product inventories in the United States from the American Petroleum Institute (API). The API said that last week crude stocks dropped by 5.21 million barrels, compared to industry forecasts that called a draw of 1-1.5 million barrels. The key Cushing storage hub also posted a drop of 625,000 barrels. But another drop in crude stocks was neutered by large gains in the products sector, as gasoline inventories were up 4.896 million barrels, while distillates added 6.873 million barrels for an overall net oil build of 6.5 million barrels. Official data from the Energy Information Administration will be released later today (at 15:30 GMT). Experts expect that the data will indicate a reduction in oil reserves by 0.2 million barrels.