Oil Prices Retreat on Surprise U.S. Inventory Build Despite Winter Demand
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Crude oil prices fell sharply on Wednesday after weekly U.S. inventory data revealed an unexpected build, tempering optimism around seasonal demand strength.
The Energy Information Administration reported a 3.8 million barrel increase in commercial crude stocks, contrasting with analyst expectations for a modest draw. Imports surged while refinery utilization dipped slightly ahead of seasonal maintenance.
Brent crude dropped toward $69.50 per barrel, erasing much of the prior session’s weather-driven gains. WTI followed suit, trading near $68.50.
“Physical markets remain reasonably tight, but the headline build caught traders off guard,” said Rebecca Babin, senior energy trader at CIBC Private Wealth.
Cold weather across the U.S. Northeast and parts of Europe continues to support heating oil and natural gas consumption, but the inventory surprise dominated sentiment. Product draws were smaller than typical for this time of year.
Energy stocks underperformed broader markets, contributing to weakness in cyclical sectors. Integrated majors like ExxonMobil and Chevron saw modest declines.
OPEC+ supply management remains in focus as the group prepares for further production increases in early 2026. Compliance has been solid, but secondary sources suggest some members are already pumping above quotas.
Geopolitical risks provide a floor, with ongoing Red Sea disruptions adding freight costs. However, no major supply outages have materialized.
Refining margins have compressed slightly as gasoline demand softens seasonally. U.S. gasoline prices at the pump continue trending lower, offering consumers relief.
Longer-term, the energy transition narrative caps upside enthusiasm. Record renewable capacity additions and corporate net-zero commitments are shifting investment priorities.
For now, traders are monitoring weather forecasts and next week’s inventory report for directional cues. The market appears range-bound between $65 and $75 absent fresh catalysts.
