Investing.co — Oil prices fell Wednesday as industry data pointed to a sustained increase in U.S. inventories, implying demand from the world’s largest consumer is coming under pressure.
At 08:35 ET (12:35 GMT), Brent oil futures fell 1.2% to $82.12 a barrel, while West Texas Intermediate crude futures fell 1.3% to $77.37 a barrel.
US oil inventories clock unexpected build – API
Data from the American Petroleum Institute showed that U.S. oil inventories grew 0.5 million barrels in the week to May 3, confounding expectations for a draw of 1.4 million barrels.
“API numbers released overnight were moderately bearish due to stock builds in both crude and products,” analysts at ING said, in a note.
“While US crude oil inventories are estimated to have increased by only 500k barrels over the week, gasoline and distillate stocks increased by 1.5m barrels and 1.7m barrels respectively. In addition, crude oil stocks at the WTI delivery hub, Cushing, grew by 1.3m barrels over the week.”
The data comes after U.S. inventories saw an unexpected, outsized build in the prior week, which spurred speculation that global oil markets were not as tight as initially expected.
The API data usually heralds a similar reading from official inventory data, which is due later on Wednesday.
Strong U.S. supplies have undermined expectations of tighter global oil markets, especially as recent data also showed U.S. oil production raced back to record highs in February.
OPEC+ to roll over supply output cuts?
Cautious expectations on supply cuts from the Organization of the Petroleum Exporting Countries and its allies ahead of a June 1 policy meeting also weighed on markets.
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Russian Deputy Prime Minister Alexander Novak said on Tuesday that there had been no discussions about an oil output increase by OPEC+, a day after he was reported saying the group had the option of increasing production.
“Our oil balance suggests that there is no need for a full rollover of the 2.2m b/d of cuts. Instead, a partial rollover should be enough to keep the market balanced for the remainder of the year,” ING added. “However, recent price action increases the risk that full cuts are rolled over, which in turn increases the risk of OPEC+ overtightening the oil market later in the year.”
Middle East tensions persist, Israel-Hamas ceasefire uncertain
Israel kept up its offensive against Rafah on Tuesday, while also seizing a key main border crossing in the city.
The move came even as Hamas officials reportedly accepted a new ceasefire proposal for Gaza – one that Israel rejected. Hamas also expressed ire over Israel’s attacks on Rafah, and that the strikes largely undermined any progress towards a truce.
Still, U.S. officials said a ceasefire could still be reached, as delegates from both sides met in Cairo for negotiations.
The prospect of continued geopolitical unrest in the Middle East presented some support to oil prices, amid bets that the unrest will disrupt supplies in the oil-rich region.
(Ambar Warrick contributed to this article.)
