Oil prices fall on US stocks increase, just as demand wanes

Singapore/London — Oil prices fell on Thursday after industry data showed a larger-than-expected build-up in the US inventories, but losses were limited after China said it hoped to reach a phased trade agreement with the US as early as possible.

Global benchmark Brent crude oil was down by 39c at $59.03 a barrel by 8.37 GMT. US West Texas Intermediate (WTI) crude oil was down 43c at $52.93.

US crude inventories soared by 10.5-million barrels to 432.5-million barrels in the week to October 11, the American Petroleum Institute’s (API) weekly report showed ahead of official government stocks data due on Thursday. Analysts had estimated US crude inventories rose by about 2.8-million barrels last week.

“An enormous US inventory build hits at precisely the wrong moment when the markets are overly focused on demand devastation due to the latest run of weaker global economic data,” Stephen Innes, Asia Pacific market strategist at AxiTrader, said in a note on Thursday.

If confirmed by the government data, the build-up would be the biggest US inventory increase since February 2017, Innes said.

It comes amid concerns about the global economy — and therefore oil demand — as data from the US showed retail sales fell for the first time in seven months in September. That followed earlier data showing a moderation in job growth and services sector activity.

Still, hopes of a potential US-China trade deal helped offset oil price losses. China’s commerce ministry said on Thursday that China hopes to reach a phased agreement with Washington as early as possible, and make progress on cancelling tariffs on each others’ goods.

“Overall, we are seeing a more constructive picture both in terms of the demand side of the equation with the partial agreement from the US [and] also from a technical point of view. [Prices] are at close to the bottom end of the trading range rather than the top,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney.

Optimism over an imminent deal on Brexit, Britain’s exit from the EU, also provided some support, but investors remained tense after Northern Ireland’s Democratic Unionist Party said it could not support the proposed agreement.

Said Hussein Sayed, market strategist at FXTM, “Brexit headlines continue to provide mixed signals despite a deal looking more likely when compared to a week ago.” 

Reuters