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Oil prices fall on large US crude build, delay in US-China trade signing
[NEW YORK] Oil prices fell on Wednesday after a much larger-than-expected build in US crude inventories and after Reuters reported that the signing of a US-China trade deal could be delayed until December.
The decline reversed the gains of the previous three sessions.
Brent crude was down US$1.06, or 1.7 per cent, to US$61.90 a barrel by 2.07pm EST (1907 GMT). West Texas Intermediate crude lost 74 cents, or 1.3 per cent, to trade at US$56.49 per barrel.
Prices extended losses after Reuters reported that a meeting between US President Donald Trump and Chinese President Xi Jinping to sign a long-awaited interim trade deal could be delayed until December as discussions continue over terms and venue.
Earlier, prices dropped after data from the Energy Information Administration (EIA) showed US crude inventories rose by 7.9 million barrels in the week to Nov 1, compared with analysts' expectations for an increase of 1.5 million barrels.
"This is definitely a shocking number, even if you're bearish you're shocked," said Phil Flynn, an analyst at Price Futures Group. "The only saving grace is the drawdown in gasoline supplies that put us below the five-year average, but that's offset by the fact that the distillate inventories – even though they fell – they're not as far below the five-year average as they were a week ago."
Petrol stocks dropped by 2.8 million barrels, compared with a forecast of a 1.8 million-barrel drop, and distillates, which include diesel and heating oil, lost 622,000 barrels, versus expectations for a decline of 949,000s, the EIA said.
A drop in crude exports and an increase in imports last week worsened the build, Flynn said.
Adding to pressures, the International Monetary Fund said euro zone economic growth was set to slow more than expected as the bloc's manufacturing crisis could spill over to the larger services sector under global trade tensions.
Data on Wednesday showed Germany's services sector barely grew in October, while euro zone business activity expanded slightly faster than expected but remained close to stagnation.
Middle East tensions offered some support. Iran started to inject uranium gas into centrifuges at an underground nuclear facility, further distancing itself from the 2015 nuclear deal between Tehran and world powers.
The United States pulled out of the nuclear pact last year and has imposed tough new sanctions on Iran.
"Alongside the continued rolling back of its nuclear commitments, the Opec nation may be tempted to cause further supply disruptions in the Middle East in a bid to drive up prices," PVM analyst Stephen Brennock said. "Accordingly, conditions are ripe for tensions in the region to escalate and for the geopolitical risk premium to strike back with a vengeance."
However, Russian Energy Minister Alexander Novak said the current oil price of more than US$60 per barrel showed that markets were stable.