HOUSTON: Oil prices edged lower on Wednesday after US data showed larger-than-expected inventories of gasoline and diesel, adding to supply concerns amid global trade tensions and ongoing OPEC+ output increases.
Brent crude futures were down 28 cents to $65.35 a barrel by 10:44 a.m. EDT (1444 GMT).
US West Texas Intermediate crude fell 8 cents to $63.33. Crude inventories dropped by 4.3 million barrels last week, the Energy Information Administration said on Wednesday, compared with analysts’ expectations in a Reuters poll for a draw of 1 million barrels. However, US gasoline stocks rose by 5.2 million barrels versus an estimate for a rise of 600,000 barrels, while distillate stockpiles rose by 4.2 million barrels compared with expectations for a rise of 1 million barrels.
“The report is in my view bearish, due to large builds in refined products,” Giovanni Staunovo, an analyst with UBS. “There was a strong increase in refinery demand for crude, resulting in a large crude draw. But post-Memorial Day, the strong supply increase with weaker implied demand resulted in large refined product inventory increases,” he added.
Plans by OPEC+ producers to increase output by 411,000 barrels per day (bpd) in July were also weighing on investors. Both benchmarks climbed about 2% on Tuesday to a two-week high, driven by worries about supply disruption and expectations that OPEC member Iran would reject a US nuclear deal proposal key to easing sanctions on it. Russia, meanwhile posted a 35% decline in May oil and gas revenue on Wednesday, which could make Moscow more resistant to further OPEC+ output hikes, as such moves weigh on crude prices.
Saudi Arabia and Russia last weekend reached a compromise on the July output increase plan as Riyadh pushed for more and Moscow argued for a pause, four OPEC+ sources with knowledge of the talks told Reuters. US President Donald Trump and Chinese leader Xi Jinping are likely to speak this week, days after Trump accused China of violating a deal to roll back tariffs and trade curbs.
On Tuesday, the Organisation for Economic Co-operation and Development (OECD) cut its global growth forecast as the fallout from Trump’s trade policies takes a bigger toll on the US economy, which would in turn impact oil demand. “Overall, we see limited upside potential amid ongoing concerns about a supply glut and softening demand growth,” analyst Ole Hansen at Saxo Bank said in a note.
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