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Oil slips after US crude build and record production

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Oil eased on Wednesday after a report showing US crude inventories grew unexpectedly last week, while petrol stocks surged and production hit another record.

[NEW YORK] Oil eased on Wednesday after a report showing US crude inventories grew unexpectedly last week, while petrol stocks surged and production hit another record.

Losses were limited by optimism that a US-China trade deal would be reached soon.

Brent crude futures settled at US$64.06 a barrel, down 21 cents. US West Texas Intermediate crude settled at US$58.11 a barrel, shedding 30 cents.

WTI trade volumes lower ahead of the US Thanksgiving holiday, with lots of front-month contracts trading down about 5 petrol compared with the previous session.

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US crude stocks swelled by 1.6 million barrels last week as production hit a record high at 12.9 million barrels per day and refinery runs slowed, the Energy Information Administration said. Analysts in a Reuters poll had forecast a drop of 418,000 barrels.

The more bearish news from the EIA was that US petrol inventories soared 5.1 million barrels, compared with expectations for a 1.2 million-barrel gain.

US petrol futures dropped 3.63 cents, or 2.1 per cent, to US$1.67 a gallon.

"EIA's estimate of a further increase in crude production to a record pace of 12.9 (million bpd) appeared to provide a significant catalyst behind today's selling," Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates, said in a note. "The RBOB (petrol) futures provided a drag on the rest of the complex as a result of a much larger-than-expected petrol stock build."

Oil prices pared losses slightly after a report showing US oil drillers reduced the number of drilling rigs for a record 12 months in a row. The rig count is an indication of future supply.

Drillers cut three oil rigs in the week to Nov 27, bringing the total count down to 668, the lowest since April 2017, energy services firm Baker Hughes said in data released early due to the US Thanksgiving holiday on Thursday.

Hopes that Beijing and Washington would strike a trade deal limited losses in oil.

Prices had risen for the last two days on expectations that China and the United States, the world's two biggest crude users, would soon sign a preliminary agreement, signalling an end to their 16-month trade dispute.

"Trade deal optimism persists," said Tamas Varga of oil broker PVM. "The belief in a positive trade deal continues unabated."

That was fuelled by comments from US President Donald Trump on Tuesday, who said the United States and China were close to agreement after top negotiators spoke by telephone and agreed to keep working on remaining issues.

REUTERS