Oil Holds Near 3-Month High Despite Surprise U.S. Crude Build

(Bloomberg) -- Oil eased gains after a surprise build in U.S. crude stockpiles contrasted with analyst expectations for a draw.

Futures in New York edged lower after closing at the highest in nearly three months. The American Petroleum Institute reported a 1.41 million-barrel build in crude inventories last week, according to people familiar with the matter. That runs counter to a Bloomberg survey of analysts predicting a draw. The U.S. government will release its weekly inventory report Wednesday.

“API’s report for a build in crude stocks, and the large builds in gasoline and distillates probably caused crude futures to fall,” said Michael Loewen, director of commodity strategy at Scotiabank in Toronto.

Seasonally, U.S. crude inventories are higher than the five-year average. Industry-backed API reported that gasoline and distillate supplies rose by over 8 million barrels combined. The gasoline build would mark the fifth consecutive rise if government data confirms it.

Demand concerns stemming from the prolonged U.S.-China trade war persist. President Donald Trump’s administration is set to put tariffs on a further $160 billion of Chinese goods Sunday, although Agriculture Secretary Sonny Perdue said they’re unlikely to be implemented. Chinese officials also expect the higher levies to be postponed, according to people familiar with the matter.

West Texas Intermediate for January delivery traded at $59.10 a barrel on the New York Mercantile Exchange at 4:57 p.m. local time. The contract settled at $59.24.

Brent for February settlement was down 8 cents at $64.14 a barrel on the London-based ICE Futures Europe Exchange. The contract settled at $64.34. The global benchmark crude traded at a $5.20 premium to WTI for the same month.

“For the market to push even higher, the key element is the signing of a trade agreement” between China and the U.S., said Gene McGillian, manager for market research at Tradition Energy. “That will rekindle expectations of economic growth and fuel demand growth.” Nevertheless, “we don’t have proof that there’s actually going to be a trade agreement,” he said.

On Friday, oil closed at the highest level since mid-September after the Organization of Petroleum Exporting Countries and its allies surprised the market with deeper-than-expected output cuts. But there are lingering concerns on adherence to the latest agreement, given under-compliance by some members in the previous round of reductions.

To contact the reporter on this story: Sheela Tobben in New York at vtobben@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick, Carlos Caminada

©2019 Bloomberg L.P.