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Oil Slips Below $54 as Trade Fears Outweigh U.S. Gasoline Demand

Oil held gains after a report showed U.S. crude stockpiles declined, while OPEC appeared closer to agreeing a date for a meeting.

Oil Slips Below $54 as Trade Fears Outweigh U.S. Gasoline Demand
A cantilevered inlet pipe sits connected to oil tanker ‘Erik Walther’ during an oil delivery at the Erik Walther GmbH oil terminal on the River Rhine in Schweinfurt, Germany. (Photographer: Alex Kraus/Bloomberg)

(Bloomberg) -- Oil slipped below $54 a barrel after a short-lived spike as anxieties about global trade and a supply glut overshadowed record gasoline consumption in the U.S.

Futures in New York closed 0.3% lower on Wednesday after earlier rising by almost 1%. The U.S. Energy Information Administration said domestic oil inventories fell by 3.1 million barrels last week, more than any of the 12 analysts in a Bloomberg survey expected. Demand for gasoline hit a record 9.93 million barrels a day and stockpiles of the motor fuel unexpectedly declined.

Oil Slips Below $54 as Trade Fears Outweigh U.S. Gasoline Demand

The report came hours after OPEC and its allies officially proposed an early July date to discuss new supply cuts, ending weeks of speculation about whether the group of major producers could overcome divisions. Saudi Arabia, Iraq and the United Arab Emirates -- OPEC’s three biggest members -- all want to keep restraining production amid signs of faltering economic growth, according to statements in recent days.

That and the bullish EIA report “all begin to reduce the uncertainties for an oil market that has a whole bunch of them, maybe the biggest of which is where demand is going to go,” said Rob Thummel, managing director at Tortoise, a Kansas-based money manager that oversees $21 billion in assets.

West Texas Intermediate for July delivery fell 14 cents to $53.76 a barrel on the New York Mercantile Exchange. The U.S. benchmark price notched its best one-day advance in five months on Tuesday as OPEC and its partners discussed an extension while the U.S. and China said they would revive stalled trade talks.

Brent for August settlement fell 32 cents, or 0.5%, to $61.82 a barrel on London’s ICE Futures Europe Exchange, after closing 2% higher on Tuesday.

Oil has slipped about 19% since late April as the prolonged trade spat dented investor confidence. Tensions in the Middle East, including the latest rocket attack near an Exxon Mobil Corp. workers’ camp in southern Iraq, are heightening market uncertainty.

See also: The Worst of Russian Tainted Oil Crisis Looks to Have Passed

Trade talks between the world’s two biggest economies continue to have a major influence on the market. U.S. President Donald Trump said Tuesday that he had a “very good” phone conversation with his Chinese counterpart Xi Jinping. The two leaders will hold an “extended meeting” at the G-20 summit in Osaka on June 28-29. Trump had repeatedly threatened more tariffs if Xi spurned the opportunity to talk.

After weeks of failed talks, some investors remain skeptical, said Bob Yawger, director of futures at Mizuho Securities USA.

“There’s a lot of folks out there saying, ‘Sure they are going to talk at the G-20. What is going to get done?’” he said. “A certain sober mood has returned to the market.”

Other oil-market news:
  • Gasoline futures rose 0.8% to $1.7355 a gallon.
  • The rocket attack near the Exxon workers’ camp had no effect on oil fields or exports, according to a person with knowledge of the matter.
  • The Federal Open Market Committee is likely to hold interest rates steady on Wednesday while opening the door to a cut -- by dropping its commitment to being “patient’’ in its policy statement, according to a Bloomberg survey of economists.

--With assistance from Rakteem Katakey and Sharon Cho.

To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Mike Jeffers

©2019 Bloomberg L.P.