Oil Declines After US Report Shows Surprising Stockpile Build
Brent crude climbed to around $81 a barrel, while West Texas Intermediate was below $79.
(Bloomberg) -- Oil fell after a government report showed a surprising build for US crude stockpiles amid concern that a global surplus will emerge later in the year.
West Texas Intermediate slipped to just over $77, while Brent crude traded around $80 a barrel. Both benchmarks fell by about 2% in the previous session. US inflation data released Wednesday was broadly in line with expectations, keeping the Federal Reserve on track to lower interest rates next month.
In the US, crude inventories rose by 1.36 million barrels, snapping a six-week streak of declines. The figure compares with estimates from the American Petroleum Institute, which on Tuesday reported inventories shrank by 5.2 million barrels. Gasoline stockpiles declined, while distillate inventories also slid, a sign of persistent demand during the summer driving season.
Prices have endured a volatile week after a sharp rally on Monday was retraced a day later. The International Energy Agency flagged a global surplus in the fourth quarter if OPEC+ proceeds with plans to restore production in October. The Organization of the Petroleum Exporting Countries had also trimmed its forecasts for global demand over this year and next, citing downward revisions for China’s outlook.
Elsewhere, risks remain that a retaliatory strike by Iran on Israel may lead to a spike in oil prices. The US said that the probability of an attack has increased and that it could come as soon as this week, with traders scrambling for protection in options markets.
The unexpected storage build may depress prices “over the short run,” said Brian Kessens, a managing director at Tortoise Capital Advisors LLC. “Over the next couple of days, I expect geopolitical risk will probably return to the fore.”
--With assistance from Yongchang Chin.
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