HOUSTON: Oil prices edged lower on Wednesday after U.S. 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). U.S. 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, U.S. 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.
Oil: War, wildfires and weak demand
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 U.S. 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.
U.S. 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 U.S. 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.
Offering some support for prices, meanwhile, were wildfires in Canada that reduced the country’s output by some 344,000 bpd, according to Reuters calculations.
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