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Oil falls as smaller US stockpile drop adds to economic woes
OIL declined as a smaller-than-expected draw in US crude and gasoline inventories added bearish sentiment to a market already reeling from a gloomy economic outlook.
Futures fell as much as 1.2 per cent in New York after gaining 1.9 per cent on Wednesday. While American crude and gasoline stockpiles both fell for a third week, they dropped less than forecast in a Bloomberg survey. Anxieties over demand resurfaced earlier this week after a slew of sluggish economic indicators from the US, China and Europe, even as the Organization of Petroleum Exporting Countries and its allies agreed to extend output cuts into 2020.
Oil is still down for the week after plunging 4.8 per cent on Tuesday, its worst reaction to an Opec meeting in more than four years. While the group's Secretary-General Mohammad Barkindo described the drop as an "anomaly", Bank of England Governor Mark Carney warned of dangers from rising protectionism around the world and said there could be a "widespread slowdown'' that may require a major policy response.
"Seasonal factors are pushing American stockpiles down, so we have to wait and see if the declines are really driven by strong demand," said Sungchil Will Yun, a commodities analyst at HI Investment & Futures Corp. in Seoul.
"While crude has slumped on weak economic data, a further decline in prices will be limited as we're likely to see countries putting effort to revive economies and as Opec is set to keep its supplies under control."
West Texas Intermediate oil for August delivery lost 59 cents, or 1 per cent, to US$56.75 a barrel on the New York Mercantile Exchange as of 7.13 a.m. in London. The contract gained US$1.09 on Wednesday, recovering some ground after slumping the most since May 31 in the previous session.
Brent for September settlement declined 68 cents, or 1.1 per cent, to US$63.14 a barrel on the ICE Futures Europe Exchange. Prices increased 2.3 per cent on Wednesday. The benchmark global crude traded at a premium of US$6.31 to WTI for the same month.
US crude inventories dropped by 1.09 million barrels last week, according to the Energy Information Administration. The Bloomberg survey had predicted a loss of 3 million barrels. Gasoline stockpiles fell by 1.58 million barrels, compared with a forecast for a 2.4 million barrel loss.
Oil production also remains near a record high. US domestic output increased to 12.2 million barrels a day last week, resuming gains after dropping since the start of June, the EIA said. Crude exports from the country fell back to below 3 million barrels a day. BLOOMBERG