Concerns about the U.S. economy following Moody’s credit rating downgrade also put a downward pressure on prices.
An unexpected increase in U.S. crude oil stocks contributed to pushing down oil prices in early morning trade on Thursday.
For the week ending May 16, “U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.3 million barrels from the previous week,” said a May 21 report from the Energy Information Administration. “At 443.2 million barrels, U.S. crude oil inventories are about 6 percent below the five-year average for this time of year.”
The 1.3 million barrel jump in oil stocks came as markets expected a dip in inventories.
A buildup in inventory happens due to multiple factors, such as an increase in production or a decline in demand. Rising levels of inventory suggest market oversupply or that people are using less fuel than normal. This puts downward pressure on oil prices.
Brent crude oil futures were trading at $63.93 per barrel as of 6:15 a.m. EDT on Thursday, down 1.51 percent.
The national average price of regular gas was $3.19 per gallon on Thursday, down by more than 11 percent from the $3.61 a year back, according to data from the American Automobile Association (AAA).
Gas was expensive in California, Hawaii, and Washington, with prices exceeding $4 per gallon. The cheapest prices were recorded in Mississippi, Louisiana, and Alabama, with gas costing $2.75 per gallon or less.
Crude oil futures had fallen for the past two days, with Thursday’s decline being the third straight fall on a daily basis.
Recent declines follow Moody’s downgrading of the U.S. credit rating from AAA to AA1 on Friday.
Moody’s justified the downgrade, saying the fiscal health of the government was deteriorating, highlighting the debt burden facing the country.
A lower credit rating is typically seen as bad news as it suggests the nation could be facing financial trouble. Given that the United States is the largest consumer of oil in the world, concerns about its financial state contribute to lowering oil prices.
Treasury Secretary Scott Bessent dismissed the downgrade, arguing that achieving faster economic growth is more important than the growth in debt. Bessent said the Trump administration will boost government finances by reducing spending and deregulating the economy.
