Oil Falls as Global Glut Fears Revived
(Bloomberg) -- Oil declined after an industry report showed a massive increase in U.S. crude stockpiles, reviving fears of a global glut.
Futures in New York fell by about 1 percent, after closing lower on Tuesday. U.S. inventories swelled by 7.29 million barrels last week, the American Petroleum Institute was said to report. If Energy Information Administration data due Wednesday confirms that, it would be the biggest increase in six weeks. Investors are also looking for a breakthrough on U.S.-China trade talks that have dragged on for the past several weeks.
A surge in U.S. stockpiles, aided by record shale flows and refinery maintenance, may cut short a crude rally. Prices have climbed over 20 percent this year as output curbs by the Organization of Petroleum Exporting Countries and its partners as well as sanctions on Iran and Venezuela reduced supplies. President Donald Trump is ready to walk away from a trade deal with China unless he secures a “perfect deal,” said Secretary of State Mike Pompeo.
“Once again, this could be the reason why we are seeing some pressure on the market,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney referring to the stockpile data. “Also, the U.S.-China trade talks are a complicated process. I think it might be dawning on oil traders that a comprehensive agreement might be weeks or even months away, rather than the days they might have been looking at.”
West Texas Intermediate for April delivery slipped as much as 1.1 percent to $55.96 a barrel on the New York Mercantile Exchange before trading 42 cents lower at $56.14 at 3:55 p.m. in Singapore.
Brent for May settlement was at $65.46 a barrel, down 40 cents, on the London-based ICE Futures Europe exchange. The global benchmark crude’s premium over WTI for the same month narrowed to $8.93 a barrel.
The gain in U.S. oil stockpiles reported by the API is significantly higher than the median forecast for a 1.45-million-barrel increase estimated by analysts Bloomberg surveyed before the scheduled EIA figures. The swelling hoard in the world’s biggest consumer is undermining efforts by Saudi-led OPEC cuts to avert a glut. The kingdom’s energy minister, Khalid Al-Falih, said last week that American inventories are “brimming” and it’s leaning toward extending production curbs beyond June.
Meanwhile, uncertainty still hangs over U.S.-China trade talks, seen crucial for reviving economic growth and boosting oil demand. Pompeo’s comments indicate that markets’ hope of a “comprehensive agreement within days might have been a bit too optimistic,” McCarthy said. The Asian nation has announced major tax cuts to boost a slowing economy as the trade tensions with America take a toll on the world’s top crude importer.
--With assistance from Tsuyoshi Inajima.To contact the reporter on this story: Saket Sundria in Singapore at firstname.lastname@example.org To contact the editors responsible for this story: Pratish Narayanan at email@example.com Ovais Subhani
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.