Oil prices fell for a second day on Wednesday as U.S. crude inventories unexpectedly rose and on worries that demand could fall after President Donald Trump doused optimism about China-U.S. trade talks.
Brent crude futures LCOc1 shed 98 cents to $62.12 a barrel, a 1.6% loss, losing gains made after an attack on Saudi oil facilities that drove the benchmark up 20% last week. U.S. West Texas Intermediate crude CLc1 fell 91 cents to $56.38 a barrel, a 1.6% loss.
Further pressuring oil prices, U.S. crude inventories unexpectedly rose 2.4 million barrels in the week to Sept. 20, the Energy Information Administration said, instead of declining 249,000 barrels as analysts expected.
Crude inventories at the Cushing, Oklahoma, delivery hub rose by 2.3 million barrels, the EIA said, while U.S. production rose to 12.5 million bpd.
“The report was bearish due to the overall rise in crude oil inventories and the large rise at the Cushing delivery hub,” said John Kilduff, partner at energy hedge fund Again Capital in New York. “The slight rise in domestic production was also bearish, if not notable, as the rig count has been on the decline.”
Trump criticized China’s trade practices at the United Nations General Assembly on Tuesday and said he would not accept a “bad deal” in U.S.-China trade negotiations.
China is the world’s largest oil importer and second-largest crude user. The United States is the largest consumer of oil.
Trump also said he saw a path to peace with Iran, cooling other risk premiums built into oil prices.
“The geopolitical risk premium has all but vanished and bullish catalysts suddenly appear in short supply across the oil market,” said PVM analyst Stephen Brennock.
OCBC economist Howie Lee said prices could still receive a boost should buyers of Saudi crude have to look for supplies in the spot market if Saudi stocks ran out.
“The market is very concerned about the demand side of the equation, but I would caution against being complacent about what’s happening in the Middle East,” Lee said.
Commerzbank’s Carsten Fritsch said the dip in prices was premature. “It is reasonable to doubt that Saudi Aramco has already made good the outages in the affected facilities almost completely,” he said.
Sources told Reuters that Saudi Arabia has restored production capacity to 11.3 million barrels per day, a quicker recovery than expected.
Source: News Agencies