Oil prices down as US inventory builds unexpectedly

London — Oil prices resumed their slide on Wednesday, dragged down after an unexpected gain in US inventories but with losses capped by a recovery in global equities on hopes of a US Fed rate cut.

Brent futures were down 29c at $61.68 a barrel by 8.53am GMT. US West Texas Intermediate (WTI) crude was down 50c at $52.98 a barrel.

US crude inventories rose unexpectedly last week, while petrol and distillate stockpiles built more than expected, data from the American Petroleum Institute (API) showed on Tuesday.

Crude stocks rose by 3.5-million barrels in the week to May 31 to 478-million barrels, compared with analysts’ expectations for a decrease of 849,000 barrels. Official numbers from the US Energy Information Administration (EIA) are due later on Wednesday.

“The stock build does not help sentiment in the current market environment,” ING bank said.

Oil prices have fallen sharply on concerns about slowing demand, but won some respite on Tuesday after a global stock market rally on hopes the US Federal Reserve may trim interest rates. Equities extended gains on Wednesday.

“Yesterday’s upswing on the back of rising stock markets was halted by an unexpectedly sharp rise in US crude oil and product stocks,” Commerzbank said.

The oil market has been weighed down by concerns about slowing global growth due to the US-China trade war and US President Donald Trump’s threats last week to place tariffs on Mexican imports.

To prevent oversupply and prop up the market, oil cartel Opec, together with allies including Russia, has withheld production since the start of the year. The group will set its policy when it meets later this month or in early July.

Underlining concerns about oversupply, the head of Russian oil giant Rosneft, Igor Sechin, said on Tuesday that Russia should pump at will and he would seek compensation from the government if cuts are extended.

Russia’s average oil output was 10.87-million barrels per day (bpd) on June 1-3, down from an average of 11.11-million bpd in May, two sources familiar with official data said. The decline follows the discovery in mid-April of contaminated Urals crude in the Druzhba pipeline to Europe.

Further pressuring oil prices and undermining Opec’s efforts to tighten the market has been a surge in US output to record highs, leading to more American crude being exported.

Reuters