Crude futures fell in after-hours trading on Thursday, reversing a multi-session rally, as markets weighed mounting signs of sluggish global demand against a larger-than-expected build in US crude stocks.
Front-month West Texas Intermediate crude futures dropped by 2.5% to $81.21 per barrel, while Brent futures were down 2.2% to $87.05/bbl.
WTI is trading near $81.19/bbl, down 2.5%, as the market gives back part of its five-session rally under the weight of a much larger-than-expected US inventory build, Gelber & Associates said, adding that the selloff has been intensified by weaker consumption forecasts.
US commercial crude oil inventories increased by 17.4 million barrels to 424.4 mmbbls in the week ended Aug. 7, the Energy Information Administration said in its weekly report on Wednesday.
Crude inventories were about 2% below the five-year average for this time of year, the EIA said.
The larger-than-expected build is above Investing.com's estimate of a 1.7-mmbbl draw for the week.
Saxo Bank strategists said that the US crude build was the largest increase since 2023, and was driven by a jump in imports and continued releases from the Strategic Petroleum Reserve.
On the supply front, the Organization of the Petroleum Exporting Countries on Wednesday slashed its global oil demand growth forecasts for 2026, marking the fourth straight month of cuts and projecting growth of 600,000 barrels per day over the year.
The reduction is 200,000 b/d less than its July forecast of 800,000 b/d, already down from 1 million b/d in June, 1.2 mmbbl/d in May, and 1.4 mmbbl/d in April.
On Wednesday, the International Energy Agency also forecast global demand to contract by 1.6 million b/d in 2026, steeper than the about 1 million b/d drop seen last month.
The IEA said that global demand is forecast to decline by 510,000 b/d from the agency's July estimate, as the ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption.
"The magnitude of this drop in crude prices is beyond what the market was positioned for and it is sending a clear bearish signal on crude, but that is only part of the picture," according to Susan Bell, senior vice president, commodity markets at Rystad Energy.
Bell said that gasoline, jet fuel, and middle distillate stocks drew in the US this week, and Europe's Amsterdam-Rotterdam-Antwerp hub saw steep gasoline draws, while jet fuel and gasoil there stabilized.
Meanwhile, the security situation in the Middle East remains risky for shippers, with attacks on vessels in the Gulf of Oman and the Red Sea this week. Yemen's Houthi allies in Yemen reportedly targeted a refinery in Saudi Arabia's Jizan region with drones.
Oman's coastline has also reportedly been affected by a massive oil spill caused by a leaking tanker that ran aground June 30 carrying an estimated 800,000 barrels of Russian oil.
UK-based maritime risk and response firm Ambrey has been hired to salvage a grounded Russian shadow fleet tanker off Oman's coast and to contain the oil spill that threatens wildlife.