Surprise rise in US crude stocks nudges oil prices down

Singapore

OIL prices fell on Wednesday after industry data showed an unexpected build-up in crude inventory in the United States and as investors waited for news on whether a fresh round of US tariffs on Chinese goods would take effect on Sunday.

Brent futures fell by 44 US cents, or 0.7 per cent to US$63.90 per barrel by 3.42am GMT (11.42am Singapore time). US West Texas Intermediate crude slipped by 33 US cents or 0.6 per cent to US$58.91 a barrel, down from a two-month high reached on Tuesday.

"At this time, everyone was expecting we would have strong draws in the inventory, but it was a build," said Tony Nunan, oil risk manager at Japanese trading house Mitsubishi Corp.

US crude stocks clocked a surprise rise in the most recent week while gasoline and distillate inventories rose, data from industry group the American Petroleum Institute shows.

Crude inventories rose by 1.4 million barrels in the week to Dec 6 to 447 million, while analysts were expecting a fall of 2.8 million barrels. The weekly US Energy Information Administration (EIA) report is due later on Wednesday.

US-China trade tensions continue to cloud the outlook for demand, with a Dec 15 deadline for the next round of US tariffs on Chinese imports approaching fast.

With the market expected to be over-supplied next year on growing shale oil output and new projects coming on stream, any additional tariffs will dent demand and, in turn, prices, said Mr Nunan. "The big question is how will the demand hold up?" he said.

"The demand slowdown in growth, a lot of it seems to be coming from the (US-China) trade war. If tariffs go into effect, sentiments will turn bearish again," he added. The US is on track to become a net exporter of crude and fuel for the first time on record on an annual basis in 2020, the EIA said, due to a production surge that has dramatically reduced its dependence on foreign oil.

Investors are also eyeing other major events this week, including the British election on Thursday and US and European Central Bank meetings for further trading cues. REUTERS