Oil falls after shock rise in US inventories concerns about weak demand

London — Oil prices fell on Wednesday after news of a rise in US crude inventories last week, defying analysts’ expectations for a big fall, while concerns about weak demand also resurfaced.

Brent crude oil was down 60c at $71.56 a barrel by 7.50am GMT. The benchmark hit a three-month low on Tuesday. US light crude was down 50c at $67.58, not far off Tuesday’s one-month low of $67.03 a barrel.

Oil markets have fallen over the past week as Saudi Arabia and other members of oil cartel Opec and Russia have increased production and as some supply disruptions have eased.

Investors have also begun to worry about the impact on global economic growth and energy demand of the escalating trade dispute between the US and its trading partners, including China.

The US oil market has been tight in recent months but data on Tuesday from the American Petroleum Institute (API) showed an unexpected rise of more than 600,000 barrels in national crude inventories. Analysts had forecast a decline of 3.6-million barrels in US crude stocks for the week through July 13.

Official numbers from the US department of energy’s Energy Information Administration (EIA) are due at 2.30pm GMT on Wednesday.

“Oil is trading lower this morning on the back of the API release, and price action later today will largely depend on what the EIA release,” said ING commodities strategist Warren Patterson. “A number broadly similar to the API could put some further pressure on the market later this afternoon.”

On the demand side, intensifying risks over trade tensions between the US and China could drag on the global economic outlook, BMI Research said. “The economic outlook is broadly positive, but a number of headwinds are emerging, not least a stronger dollar, rising inflationary pressures and tightening liquidity. Slowing trade growth will weigh on physical demand for oil.”

Kansas City Federal Reserve Bank president Esther George said on Tuesday that uncertainty over US trade policy could slow the economy, even if the recently imposed tariffs in and of themselves are too small to have a big impact, saying trade policy was a “significant” downside risk to the outlook for economic growth.

Reuters