Oil loses ground after US stocks increase

Melbourne — Oil prices fell in early trade on Wednesday after industry data showed US crude inventories unexpectedly rose last week as a deep freeze in the southern states curbed demand from refineries that were forced to shut.

Crude stockpiles rose by 1-million barrels in the week to February 19, the American Petroleum Institute (API) reported on Tuesday, against estimates for a draw of 5.2-million barrels in a Reuters poll.

API data showed refinery crude runs fell by 2.2-million barrels a day.

US West Texas Intermediate (WTI) crude futures were down 55c or 0.9% at $61.12 a barrel at 1.36am GMT, after slipping 3c on Tuesday.

Brent crude futures fell 38c, or 0.6%, to $64.99 a barrel, erasing Tuesday’s 13c gain.

Investors will be awaiting confirmation from the US Energy Information Administration later on Wednesday that crude inventories rose last week, despite the hit to shale oil production amid the unprecedented icy spell in the US south.

“The key question is how quickly does US oil supply recover. It looks like supply will recover faster than refineries, and supply is going to outpace demand in the next few weeks. That will give negative weight to the market,” Commonwealth Bank analyst Vivek Dhar said.

The price retreat is being seen as a pause after a rally of more than 26% to 13-month highs in both Brent and WTI since the start of the year.

Prices have jumped due to the US supply disruption and supply discipline by oil cartel Opec and allies, together called Opec+, led by an extra 1-million barrels a day cut by Saudi Arabia.

At the same time stimulus spending to boost growth, investors rotating into commodities, and the hope that the rollout of vaccinations could lead to an easing of pandemic restrictions are all buoying oil prices.

Reuters