Oil slips on surprise build in crude stocks, but buoyed by hopes for firmer demand

Singapore — Oil retreated on Wednesday after rising more than 1% in the previous session as US industry data showed a surprise build in crude stocks, but hopes for firmer demand next year checked a deeper fall in prices.

A “phase one” US-China trade deal announced last week has helped ward off some pressure from the oil market, dampened by worries over the economic impact of a prolonged dispute between the world’s two biggest oil consumers.

Brent crude futures dropped 21c, or 0.32%, to $65.89 a barrel by 3.10am SA time. The international benchmark rose 1.2% to $66.10 a barrel on Tuesday.

West Texas Intermediate (WTI) crude futures fell 31c, or 0.51%, to $60.63 per barrel.

“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. However, he added “it’s 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.”

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 showed.

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

Meanwhile, deeper production cuts coming from Opec and allies such as Russia — a group known as Opec+ — continued to support market sentiment and prevented a bigger slide in prices on Wednesday.

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

Reuters