Oil Drops as U.S. Stockpiles Report Stokes Fears of Supply Glut
Even if OPEC cuts deeper, West Texas Intermediate crude futures may only rise to about $60 a barrel.
(Bloomberg) -- Oil resumed declines as an industry report signaling a surprise jump in U.S. crude inventories stirred fears of a supply glut at a time when trade wars are jeopardizing the global demand outlook.
Futures in New York dropped as much as 1.2% after closing up 0.4% on Tuesday following a four-day drop. The American Petroleum Institute reported U.S. crude stockpiles rose by 3.55 million barrels last week, according to people familiar with the data. That compares with the median estimate in a Bloomberg survey for a 2 million barrel decline.
Oil is teetering on the edge of a bear market after falling almost 20% from a peak in late April as an aggressive U.S. trade policy stokes fears that the global economy is headed for a sharp slowdown. This has made it likely that the Organization of Petroleum Exporting Countries and its allies will extend their production curbs beyond June. But given the magnitude of the drop in prices, Saudi Arabia may now need to cut even deeper to soothe investors, according to Helima Croft, chief commodities strategist at RBC Capital Markets.
“Markets are bearish with the outlook for slowing growth in global crude demand, as well as rising U.S. production leading to a glut,” said Miyoko Nakashima, a senior strategist at Mizuho Securities Co. in Tokyo. Even if OPEC cuts deeper, West Texas Intermediate crude futures may only rise to about $60 a barrel as the trade conflicts will limit demand growth, she said.
WTI for July delivery fell 18 cents, or 0.3%, to $53.30 a barrel on the New York Mercantile Exchange at 9:28 a.m. in Singapore after dropping as much as 62 cents earlier. It lost 19.3% from a high on April 23 through Tuesday’s close.
Brent for August settlement dropped 8 cents, or 0.1%, to $61.89 a barrel on London’s ICE Futures Europe exchange. The contract climbed 69 cents to $61.97 on Tuesday. The global benchmark crude was trading at a premium of $8.42 to WTI for the same month.
--With assistance from James Thornhill.
To contact the reporter on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net
To contact the editors responsible for this story: Serene Cheong at scheong20@bloomberg.net, Andrew Janes, Heesu Lee
©2019 Bloomberg L.P.