Tokyo: Oil extended losses after a surprise jump in American crude inventories alleviated concerns over a supply crunch, while fears of a full-blown trade war between the US and China weighed on the outlook for demand.
Futures fell as much as 1 per cent in New York after tumbling 2.7 per cent on Wednesday, the biggest drop in almost three weeks. American stockpiles rose by 4.7 million barrels last week to the highest level since mid-2017, despite expectations for a decline, while fuel inventories also climbed. Global equities weakened after the White House was said to be considering cutting off the flow of vital US technology to five Chinese surveillance companies.
Oil is on course for its first monthly loss this year after a dramatic escalation in the trade dispute between the world’s two biggest economies jeopardised the outlook for global growth. While there’s no shortage of supply risks — including the possibility that the Organisation of Petroleum Exporting Countries will extend its output curbs or that rising tension in the Middle East will disrupt energy flows — swelling US stockpiles are mitigating those concerns.
“Neither renewed Middle East tensions nor the possibility of extending Opec+ output cuts has managed to bump crude oil from its tight range,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “Global worries about the impact of the trade war on global economic growth as well as a stubbornly strong dollar” are capping prices.
West Texas Intermediate crude for July delivery fell 52 cents, or 0.9 per cent, to $60.90 (Dh224) a barrel on the New York Mercantile Exchange at 10:15am London time. Earlier it slipped to $60.79, the lowest since May 14. The contract dropped $1.71 on Wednesday to close at $61.42.
Brent for July settlement declined 69 cents, or 1 per cent, to $70.30 a barrel on the London-based ICE Futures Europe exchange. The contract lost $1.19 to $70.99 on Wednesday. The global benchmark crude was at a $9.39 premium to WTI.
Along with the increase in US crude inventories, Energy Information Administration data released Wednesday showed gasoline and distillate stockpiles also defied forecasts to rise last week. American crude production climbed by 100,000 barrels a day to 12.2 million barrels a day, near the record-high reached last month.