[HOUSTON] Oil prices settled down just over 1 per cent on Wednesday after US data showed surprisingly large build in petrol and diesel inventories, swelling fuel supplies with Opec+ planning more output and trade tensions clouding the energy demand outlook.
Brent crude futures closed down 77 cents, or 1.2 per cent, at US$64.86 a barrel. US West Texas Intermediate crude settled 56 cents, or 0.9 per cent lower at US$62.85.
US petrol stocks swelled by 5.2 million barrels, the Energy Information Administration said. Analysts polled by Reuters had expected a rise of 600,000 barrels.
Distillate stockpiles rose by 4.2 million barrels compared with expectations for a rise of 1 million barrels.
Crude inventories dropped by 4.3 million barrels. Analysts polled by Reuters had expected a draw of 1 million barrels.
“The report is in my view bearish, due to large builds in refined products,” Giovanni Staunovo, an analyst with UBS.
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“There was a strong increase in refinery demand for crude, resulting in a large crude draw. But post-Memorial Day, the strong supply increase with weaker implied demand resulted in large refined product inventory increases,” he added.
Plans by Opec+ producers to increase output by 411,000 barrels per day (bpd) in July were also weighing on investors.
On Tuesday, both benchmarks climbed about 2 per cent to a two-week high, driven by worries about supply disruptions and expectations that Opec member Iran would reject a US nuclear deal proposal key to easing sanctions.
Russia posted a 35 per cent decline in May oil and gas revenue, which could make Moscow more resistant to further Opec+ output hikes, as such moves weigh on crude prices.
On Tuesday, the Organisation for Economic Co-operation and Development (OECD) cut its global growth forecast as the fallout from Trump’s trade policies takes a bigger toll on the US economy, which would in turn impact oil demand.
Meanwhile, US President Donald Trump and Chinese leader Xi Jinping are likely to speak this week, days after Trump accused China of violating a deal to roll back tariffs and trade curbs.
US economic activity has declined and higher tariff rates have put upward pressure on costs and prices in the weeks since Federal Reserve policymakers last met to set interest rates, the central bank said in its latest snapshot of the economy.
Geopolitical tensions continued to escalate. Russian President Vladimir Putin told Trump that he must respond to high-profile Ukrainian drone attacks on Russia’s nuclear-capable bomber fleet and a deadly bridge bombing that Moscow blamed on Kyiv.
“Overall, we see limited upside potential amid ongoing concerns about a supply glut and softening demand growth,” analyst Ole Hansen at Saxo Bank said in a note.
Meanwhile, production operations in Canada, some of which was shut-in due to wildfires, were restarting on Wednesday.
Canadian Natural Resources said it has restarted its Jackfish 1 oil sands site in northern Alberta after determining wildfires in the region were a safe distance away.
Wildfires in Canada had reduced the country’s output by some 344,000 bpd, according to Reuters calculations on Tuesday. REUTERS
