Oil edges down on gloomy outlook and rise in US stockpiles

London — Oil edged lower on Wednesday unable to shake off the downbeat mood of the past two days in response to a sharp rise in US stockpiles of products such as petrol, pointing to weak demand during the summer driving season in the US.

Brent crude futures were down 10c at $63.56 a barrel by 8.40am GMT. They fell 1% on Wednesday, and 3% on Tuesday. US West Texas Intermediate (WTI) crude futures were down 19c at $56.59. The US benchmark dropped 1.5% in the previous session, and 3% on Tuesday.

Mixed signals from the US and Iran also left market in limbo. US President Donald Trump said on Tuesday that progress had been made with Iran but Tehran denied it was willing to negotiate over its missile programme.

US officials also said on Wednesday that they were unsure whether an oil tanker towed into Iranian waters was seized, or rescued.

Data on Wednesday from the US Energy Information Administration (EIA) showed a larger-than-expected drawdown in crude stockpiles last week, but traders focused instead on large builds in refined product inventories dragging prices down.

US crude inventories fell 3.1-million barrels, the EIA said, more than analysts’ forecasts for a decrease of 2.7-million. However, petrol stocks rose 3.6-million barrels, compared with analysts’ expectations in a Reuters poll for a 925,000-barrel drop. Distillate stockpiles grew by 5.7-million barrels, much more than expectations for a 613,000-barrel increase, the EIA data showed.

“Due to the combination of unattractive weekly statistics on US oil inventories from the EIA and sluggish performances from the stock markets, Tuesday’s sell-off did not turn out to be a buying opportunity, at least not for the time being,” PVM analyst Tamas Varga said.

Crude production was disrupted last week by Storm Barry, which came ashore on Saturday in central Louisiana as a category 1 hurricane, the first major storm to hit the US Gulf of Mexico this season.

More than half of daily crude production in the Gulf of Mexico remained offline by Tuesday, as most oil companies were re-staffing facilities to resume production. The “easing of tensions between the US and Iran, mixed Chinese growth data, and storm-hit operations getting back online are all pressuring oil prices downward”, Alfonso Esparza senior market analyst at Oanda, said.

Japan’s exports fell for a seventh straight month in June, with shipments to China falling more than 10%, while Japanese manufacturers’ business confidence fell to a three-year low.

Reuters