Oil falls after surprise increase in US stocks

Tokyo — Oil prices fell on Wednesday after industry data showed US stockpiles of crude unexpectedly rose, starting the new month in negative territory after the largest monthly decline in two years in July.

October Brent crude futures dropped 30c, or 0.4%, to $73.91 a barrel by 3.25am GMT, adding to a 1.8% loss in the previous session.

US crude futures were down 37c, or 0.5%, at $68.39 a barrel, having dropped nearly 2% on Tuesday.

Brent fell more than 6% in July, while US crude futures slumped about 7%, the biggest monthly decline for both benchmarks since July 2016.

Data from the American Petroleum Institute (API) showed domestic crude inventories rose by 5.6-million barrels last week. A Reuters poll had forecast a fall of 2.8-million barrels.

Official data from the US Energy Information Administration (EIA) is due later on Wednesday.

“API … showed a big build. So all eyes will be on the EIA data this evening,” said Greg McKenna, chief market strategist at AxiTrader.

Nonetheless, the bigger picture shows that US oil production may not be growing quite as fast as everyone thinks, Bloomberg reports.

American drillers pumped 10.442-million barrels a day in May — about 300,000 fewer barrels a day than the Energy Information Administration had projected.

In a report released Tuesday, the agency revised its weekly production estimates for the month, lowering average May output by 3%.

The slide comes as the US churns out record volumes of crude, with explorers expanding the US rig fleet by more than 110 since January.

The decline, reported in the Energy Information Administration’s monthly Crude Oil and Natural Gas Production report, suggests that figures for June also might clock in lower than estimated, Bloomberg said.

For now, the agency’s preliminary June production estimate is a record 11-million barrels a day.

The May data released on Tuesday is still subject to change, according to Energy Information Administration spokesman Paul Hesse. In the same report, the agency revised upward its April production figures by 5,000 barrels a day.

Middle East disruption

Signs that a supply disruption in the Bab al-Mandeb Strait in the Red Sea could be resolved also weighed on prices.

Yemen’s Houthi group said it was ready to unilaterally halt attacks in the Red Sea to support peace efforts. Saudi Arabia suspended oil shipments through the strait last week after the Houthis attacked two Saudi oil tankers.

A Reuters poll showed that oil prices are likely to hold fairly steady this year and next as increased output from oil cartel Opec and the US meets growing demand led by Asia and helps to offset supply disruptions.

Opec has pledged to offset the loss of supply from Iran, the group’s third-biggest producer.

Looming US sanctions have already started to cut Iranian exports, with buyers from its biggest customers in Asia cutting imports to a seven-month low in June.

Reuters and Bloomberg