Oil prices took a hit Feb. 14, as the U.S. stockpiles expanded in the first week of February and demand fell in the same period.

U.S. crude oil stocks rose by 12.8 MMbbl from Feb. 2 to Feb. 9, the U.S. Energy Information Administration reported, while demand for finished petroleum products dropped by 973,000 bbl/d. Andrew Fletcher, senior vice president of commodity derivatives at KeyBank National Association, had expected an inventory build of 3.3 MMbbl of crude oil.

U.S. Oil Stockpiles Surge as Prices Dip, Production Remains Elevated
(Source: U.S. Energy Information Administration)

Traders reacted to the news, as WTI prices fell by more than $1.275, opening the day at $77.81 and finishing at $76.88 per barrel. Futures contracts fell by at least $0.92/bbl for each of the next four months.

Oil prices had gained 1% earlier in the day’s trading, following news reports that Israel had called in airstrikes on targets in Lebanon after a rocket attack, escalating tensions in the area and potentially raising the possibility of an enlarged military response by Israel in the Gaza Strip.

Tensions in the area could affect the world’s supply of crude oil, as Houthis continue to attack tankers and cargo ships in the Red Sea. However, U.S. crude production continues to set records. On Feb. 12, the EIA estimated that U.S. production in December hit 13.3 MMbbl/d average, a new record.

The EIA expected production would fall to a 12.6 MMbbl/d average in January, thanks to cold weather shutting down some facilities.

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