Profit-taking and weak demand trips up oil

Singapore — Oil prices dipped on Thursday after sharp gains in the previous session following a surprise draw in US crude inventories, with concerns over a weak demand outlook adding to downward pressure.

Brent crude futures fell 33 cents, or 0.5%, to $60.84 a barrel by 3.35am GMT. The international benchmark crude rose 2.5% on Wednesday to settle at $61.17 a barrel, levels not seen since September 30.

West Texas Intermediate (WTI) crude futures dropped 44 cents, or 0.8%, to $55.53 a barrel. US crude closed 3.3% higher in the previous session.

“Oil is seeing profit-taking in Asia after last night’s sharp up-move,” said Jeffrey Halley, senior market analyst at Oanda.

US crude inventories fell 1.7-million barrels in the week ended October 18, compared with analysts’ expectations for a 2.2-million barrel build, data from the Energy Information Administration showed.

This was in stark contrast with earlier inventory data released by industry group the American Petroleum Institute (API), which showed a build of 4.5-million barrels in US crude stocks.

The EIA said the drawdown in weekly stocks came as refineries hiked crude runs and oil imports fell, which prodded a jump in both benchmark crude grades on Wednesday.

But persistent concerns about weak demand outlook continue to weigh on market sentiment, traders said.

“Flagging global economic growth and rising downside risks have kept global risk appetites measured as traders deliberate weaker fuel demand for the coming term,” said Benjamin Lu, analyst at Singapore-based brokerage Phillip Futures.

Some market participants said a decline in US product inventories, as shown by the EIA data, could point to underlying demand.

“The EIA report may be an indication that oil demand is not as bad as a current dreary run of global headline macro data might suggest,” said Stephen Innes, market strategist at AxiTrader.

The prospects of deeper production cuts by Opec and its allies also helped to support the market.

Russian energy minister Alexander Novak, however, said on Wednesday that no formal calls have been made yet to change the current global oil supply deal.

Opec, Russia and other producers have since January implemented a deal to cut oil output by 1.2-million barrels a day until March 2020 to support the market. The producers will meet to review the policy on December 5-6. 

Reuters