DTN Oil

WASHINGTON (DTN) -- Reversing lower from an early session advance, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled down Wednesday under pressure from large builds across U.S. crude and refined fuels stockpiles during the first week of 2024, with the downside limited by a softer U.S. dollar index.

The greenback lost ground against a basket of foreign currencies on Wednesday, falling 0.2% to 102.080 as traders increased exposure to risk assets ahead of fresh inflation data for the United States. U.S. Bureau of Labor Statistics will release the Consumer Price Index for December 8:30 AM ET Thursday.

A consensus calls for overall price pressure to have ticked slightly higher last month, reflecting rising food and energy prices. On the month, CPI is expected to inch up to 0.2% from November's 0.1% gain, bringing annualized rate in inflation to 3.2%. While still above the Federal Reserve's 2% target, headline inflation has fallen at a rapid clip over the past 12 months, easing from 6.5% in December 2022 to just a tick above 3% in November 2023. So-called core inflation, which excludes volatile food and energy categories, is also forecast to have declined to 0.2% for December and 3.8% on an annualized basis.

Investors will closely monitor the CPI report for confirmation that the Federal Reserve could start cutting interest rates in March. A stronger-than-expected employment report for December briefly pared back those bets, but more than 65% of investors still envision a 25-basis point rate cut in two months' time.

That comes against a background of slowing global growth that is forecast to ease to 2.4% this year, down from 2.6% estimated for 2023, and 3% for 2022, according to the latest estimates from the World Bank. GDP for advanced economies slips from 1.5% in 2023 to 1.2% this year, and from 4% to 3.9% for emerging and developing economies, citing "the tightest financial conditions in decades."

Underlying losses in the oil complex, U.S. commercial crude oil inventories unexpectedly increased 1.3 million bbl during the first week of January, with another 600,000 bbl added to the Strategic Petroleum Reserves. EIA also showed outsized builds in product inventory continued during the first week of January, with gasoline stocks up 8 million bbl to 244.982 million bbl, a 22-month high. API late Tuesday afternoon reported a 4.896 million bbl increase in gasoline stocks for the week-ended Jan. 5.

A 6.5 million bbl increase in distillate inventory was more than expected by the market pre-API, while slightly below the Washington, D.C.-based trade association's survey showing a 6.873 million bbl build. Distillate stocks have now increased for seven consecutive weeks through Jan. 5 to a 132.4 million bbl 16-month high.

At settlement, NYMEX West Texas Intermediate futures declined $0.87 to $71.37 bbl, and ICE March Brent fell back $0.79 to $76.80 bbl. NYMEX February ULSD futures were $0.0498 lower at $2.6006 gallon at settlement, and February RBOB declined $0.0095 to $2.0673 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com