Oil Holds Losses on Demand Concerns

Oil Holds Losses on Demand Concerns
Oil held losses as a surprise gain in U.S. crude stockpiles added to deepening concerns over the outlook for global demand.

(Bloomberg) -- Oil held losses as a surprise gain in U.S. crude stockpiles added to deepening concerns over the outlook for global demand.

Futures were steady in New York after falling 3.3% on Wednesday. American inventories rose by 1.58 million barrels last week, compared with expectations for a 2.5 million barrel draw in a Bloomberg survey. Weak economic data from Germany and China added to the negative sentiment, while a closely watched part of the Treasury yield curve inverted, raising recession fears.

Oil is down around 6% this month as the U.S.-China trade war and near record-high American production dented the demand outlook. Crude joined a global sell-off of risk assets on Wednesday, with the 10-year Treasury yield dropping below the rate on the two-year for the first time since 2007.

“Bond markets sounded the recessionary alarm bells,” Stephen Innes, managing partner at VM Markets Ltd. in Singapore, said in a note. “The bulging U.S. crude stockpiles added to the unfavorable mix.”

West Texas Intermediate crude for September delivery added 1 cent to $55.24 a barrel on the New York Mercantile Exchange as of 7:38 a.m. in London after dropping as much as 1% earlier. The contract lost $1.87 to settle at $55.23 on Wednesday, snapping a four-day gain.

Brent for October settlement declined 16 cents, or 0.3%, to $59.32 on the ICE Futures Europe Exchange. The contract closed 3% lower Wednesday, ending a four-day rally. The global benchmark crude traded at a $4.05 premium to WTI for the same month.

U.S. stockpiles posted a surprise increase for a second week, following seven straight weeks of declines. Inventories typically drop at this time of year due to the summer driving season.

contraction in Germany’s economy and Chinese industrial output growth that trailed estimates added to concerns a global slowdown is deepening. White House Trade Adviser Peter Navarro said the U.S. can’t meet China halfway in trade talks in an interview on Fox Business Network.

--With assistance from James Thornhill.

To contact the reporter on this story:
Sharon Cho in Singapore at ccho28@bloomberg.net

To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Ben Sharples, Andrew Janes


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