HOUSTON – Oil prices dropped about 1% on Wednesday following a surprise build in U.S. crude inventories, and as investors waited to see if a fresh round of tariffs by Washington on Chinese goods would come into force on Sunday.
Source: Reuters/Jessica Lutz
Brent futures LCOc1 fell 80 cents to $63.54 per barrel by 10:29 a.m. CDT (1629 GMT). West Texas Intermediate crude CLc1 slipped 61 cents to $58.63 a barrel.
U.S. crude oil stockpiles rose unexpectedly last week, while gasoline and distillate inventories jumped sharply higher, the Energy Information Administration said. [EIA/S]
Crude inventories rose 822,000 barrels last week, compared with analysts’ expectations in a Reuters poll for a 2.8 million-barrel drop. At 447.9 million barrels, crude stocks were about 4% above the five-year average for this time of year, the EIA said.
However, stocks at the Cushing, Oklahoma, delivery hub for WTI fell 3.4 million barrels last week, their biggest decline since February 2018, the EIA said.
U.S. inventories of gasoline jumped 5.4 million barrels and distillates, which include diesel and heating oil, rose 4.1 million barrels – both more than double analysts’ expectations.
U.S. gasoline RBc1 and heating oil HOc1 futures were up about 2%.
Winter storms that brought heavy snows on several U.S. states last week impacted domestic gasoline demand and likely caused inventories to rise, said Phil Flynn, senior energy analyst at Price Futures Group in Chicago.
“People’s cars were parked, and you saw a big drop in (fuel) demand. The market is reacting to headline number, but we don’t see this as a trend, we see it as a one-off,” Flynn said.
OPEC released a more bullish outlook for 2020, forecasting demand for its crude to average 29.58 million barrels per day next year, less than the group’s November output.
The Organization of the Petroleum Exporting Countries’ expectation of a small deficit suggests a tighter market than previously thought. It had initially projected a 2020 supply glut, but U.S. shale output has grown more slowly than expected.
U.S.-China trade tensions continue to cloud the outlook for demand, with a Dec. 15 deadline for the next round of U.S. tariffs on Chinese imports approaching.
OPEC and allied oil producers led by Russia last week decided to deepen supply cuts amid a weak outlook for oil demand growth next year.
But a bullish jolt after the agreement appears to have dissipated as demand concerns “returned to the fore,” said PVM oil market analysts.
“The cautionary mood is likely to prevail as investors await fresh cues on the trade front,” they said.
