Oil Dragged Down by Swelling U.S. Stockpiles and Trade Tensions

(Bloomberg) -- Oil tumbled the most in almost three weeks as a raft of negative U.S. data revived fears of a supply glut while persisting U.S.-China trade tensions threaten demand.

Futures in New York slipped 2.7% Wednesday, the biggest drop since May 2, after the U.S. Energy Department said weekly crude inventories had swelled to the highest level since July 2017. Gasoline stockpiles also grew faster than expected, domestic oil production ticked up and refinery utilization fell to the lowest seasonally adjusted level in five years.

Prices had already been falling along with equity markets Wednesday as trade tensions between the world’s top two economies showed no signs of abating. The Trump administration was said to be considering new restrictions on Chinese firms, after blacklisting Huawei Technologies Co. last week. On Tuesday, the Organization for Economic Cooperation and Development trimmed its global growth projection.

“It’s a tough one to be bullish about,” said Rob Thummel, managing director at Tortoise, a Kansas-based money manager that oversees $21 billion in assets, referring to the Energy Department report. Aside from a drop in crude imports to the U.S., “everything else here would be a trend that leads to lower oil prices.”

West Texas Intermediate crude for July delivery fell $1.71 to $61.42 a barrel on the New York Mercantile Exchange at the close of official trading.

Brent for July settlement declined $1.19, or 1.7%, to $70.99 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a $9.57 premium to WTI.

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Oil investors are assessing conflicting supply and demand signals. While U.S. supplies and trade conflicts are keeping prices in check, the Organization of Petroleum Exporting Countries and its allies are restricting output to prop up the market. Conflicts in the Middle East and unplanned outages from Libya to Venezuela have also tightened global supplies.

“While forecasts by the OECD and others suggest demand growth will slow, OPEC is expected to control supply,” said Miyoko Nakashima, a senior strategist at Mizuho Securities Co. in Tokyo. “That means there is a limited upside, but prices may stay in a relatively stable range.”

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