Oil falls on surprise build in US crude inventories

London — Oil prices fell on Wednesday after US industry data showed a surprise build up in crude inventories but losses were kept in check by expectations for an uptick in demand in 2020 on the back of progress in resolving the US-China trade dispute.

Brent crude futures dropped 41c, or 0.6%, to $65.69 a barrel by 9.40am GMT on Wednesday. West Texas Intermediate (WTI) crude futures fell 52c, or 0.9%, to $60.42 a barrel.

Prices had risen more than 1% in the previous session after the announcement last week of the first phase of a US-China trade deal, which lifted global economic prospects and improved the outlook for energy demand.

“The sizzling oil market rally came to a grinding halt after an unexpected climb in the weekly US crude inventory report,” said Stephen Innes, market strategist at AxiTrader, although he said figures for stocks were “unlikely to be a game-changer”.

“Investors have transcended the trade deal-inspired relief rally euphoria, and are now banking on a fundamental, demand-driven shift that could quicken the pace of the oil market rebalancing in the first quarter of 2020,” he said.

US crude inventories climbed 4.7-million barrels in the week to December 13 to 452-million, compared with analysts’ expectations for a draw of 1.3-million barrels, data from industry group the American Petroleum Institute (API) showed.

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

“As much as the API has taken the wind out of bulls’ sails, the lull in upside is expected to be short-lived. After all, recent positive developments have given oil fundamentals for 2020 a supportive shot in the arm,” said Stephen Brennock of oil broker PVM.

Deeper production cuts coming from oil cartel Opec and its allies, such as Russia, which make up Opec+, also continued to offer some support and prevented a further slide in prices.

Opec+, which has cut production by 1.2-million barrels per day (bpd) since January 1 2019, will make a further output cut of 500,000 bpd from January 1 2020, to support the market. 

Reuters