Oil Holds Losses on Demand Concerns
(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.
A 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.
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