Oil prices dipped on Wednesday, stalling a three-day rally, as an unexpected rise in US oil inventories sparked demand concerns, while investors awaited US inflation data to gauge the next rate decision in the top oil consuming nation.
Brent crude dropped 52c, or 0.7%, to $76.92 a barrel at 4.55am GMT, while US West Texas Intermediate (WTI) crude fell 49c, also 0.7%, to $73.22.
In a possible sign of weakening demand, US crude inventories rose by about 3.6-million barrels in the week ended May 5, while petrol stockpiles rose by 399,000 barrels, the American Petroleum Institute reported on Tuesday according to market sources.
The data defied expectations from eight analysts polled by Reuters for a 900,000-barrel drawdown in crude inventories and a 1.2-million-barrel drop in petrol stocks.
US government data on oil inventories is due on Wednesday.
The surprising US inventory build-up coupled with lower crude imports and softer export growth in China in April worsened worries about global oil demand.
“Oil investors should watch out for clues on the economic health of the US economy, which in my opinion looks very dim and bleak as of now,” said Priyanka Sachdeva, analyst from Phillip Nova.
The market is awaiting US consumer price index (CPI) figures for April due to released on Wednesday.
New York Fed president John Williams said inflation remains too high and that the central bank will raise rates again if necessary, even though the US central bank dropped guidance about the need for future hikes.
The market is also awaiting the monthly oil report from oil cartel Opec due on Thursday for clues to whether the group and its allies will need to cut output again to prop up prices.
Opec and its allies, known as Opec+, agreed in April to cut production by 1.16-million barrels a day (bbl/day) from May through the end of the year.
Media reported that Russia's energy ministry said the nation’s oil output reduction almost reached targeted levels in April.
Saudi Arabia, which pledged to cut production by 500,000bbl/day from May, has informed buyers in Asia that it will supply full crude oil volumes requested for June. Some Chinese refiners may have asked for less supply, sources said, which would help the world’s top oil exporter meet its lower output target.
In Alberta, Canada’s main oil-producing province, wildfires eased on Tuesday thanks to cooler weather. The wildfires forced oil and gas producers to shut in at least 319,000 barrels of oil equivalent a day, or 3.7% of the country’s production.
Markets were also monitoring US President Joe Biden and top Republican legislators’ comments on raising the $31.4-trillion US debt ceiling, fearing an unprecedented default if Congress does not act in three weeks.
Reuters
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