HOUSTON: Oil prices fell about 1% on Wednesday as U.S. fuel inventory builds reinforced views in the market of shrinking demand as the wider economic impact from U.S. tariffs could curb consumption.
Brent crude futures fell 71 cents, or 1%, to $68 a barrel by 10:50 a.m. ET (1450 GMT). U.S. West Texas Intermediate crude futures were down 69 cents, or 1%, at $65.82.
U.S. crude stocks fell while gasoline and distillate inventories rose last week, the Energy Information Administration said on Wednesday.
Crude inventories fell by 3.9 million barrels to 422.2 million barrels in the week ended July 11, the EIA said, compared with analysts’ expectations in a Reuters poll for a 552,000-barrel draw.
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U.S. gasoline stocks rose by 3.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 1 million-barrel draw.? Distillate stockpiles, which include diesel and heating oil, rose by 4.2 million barrels versus expectations for a 200,000-barrel rise, the EIA data showed.
“I think the market is disappointed to see large builds in gasoline and distillate inventories as refiners are operating at near their highest levels of the year turning oil into refined products,” said Andrew Lipow, president of Lipow Oil Associates.
“I think investors are also disappointed to see gasoline demand fall just after July 4 as we are now in the peak summer driving season,” he added.
The amount of products supplied for gasoline, a proxy for demand, eased 670,000 barrels per day to 8.5 million bpd.
Meanwhile, U.S. President Donald Trump’s tariff war continues, with the European Commission preparing possible retaliation if talks with Washington fail to secure a trade agreement for the European Union.
Trump also said on Monday that the United States will impose “very severe tariffs” on Russia in 50 days if there is no deal to stop the war in Ukraine.
Analysts said selling linked to concerns about economic disruption and weaker demand was offset by anticipation China, the world’s biggest crude importer, will need more oil.
Chinese state-owned refiners are completing maintenance to meet higher third-quarter fuel demand and to rebuild diesel and gasoline stocks at multi-year lows, traders and analysts said.
Barclays estimated that Chinese oil demand in the first half of the year grew by 400,000 barrels per day year-on-year to 17.2 million bpd.
Meanwhile, OPEC’s monthly report on Tuesday forecast that the global economy would do better in the second half of the year.
Brazil, China and India are exceeding expectations while the United States and EU are recovering from last year, it added.
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