Oil Slips Most in a Month Amid U.S. Supply Boost, Demand Warning

(Bloomberg) -- Oil suffered its worst loss in more than a month as burgeoning U.S. crude supplies and a cautious view on demand flashed warning signs for traders.

Futures fell 1.6 percent at the close of New York trading, a day after government data showed American crude inventories swelling to the highest since 2017. The International Energy Agency said that while global supplies are tightening for now, the agency could lower its forecasts because of economic threats.

The Organization of Petroleum Exporting Countries and its allies have propelled crude’s 40 percent surge this year by cutting output, with supply disruptions from Libya to Venezuela adding momentum. Pushing in the other direction have been fears over the global economy and signs that the price rally will unleash a new torrent of American shale oil.

“We were probably due" for a pullback, said Bill O’Grady, chief market strategist at Confluence Investment Management Llc. in St. Louis. “There’s all this stuff hanging out there that is supportive of prices, but when you get down to basic inventory data, you really can’t justify being at the level we’ve been at."

Still, he said, “what you have seen in this market is that every time we get a pullback, we are marching higher again in a day or two."

West Texas Intermediate for May delivery fell $1.03 to $63.58 a barrel on the New York Mercantile Exchange, its biggest daily decline since March 1. On Wednesday, prices had closed at the highest level in more than five months.

Brent for June settlement declined 90 cents, or 1.3 percent, to $70.83 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a premium of $7.16 to WTI for the same month.

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U.S. crude stockpiles expanded by about 7 million barrels last week, more than double the amount analysts had forecast, the Energy Information Administration said on Wednesday. At 456.6 million barrels, inventories are well above the five-year average. That suggests American output, which held at a record 12.2 million barrels a day last week, may still add to a global glut.

Striking a more bullish tone, the IEA said Thursday that worldwide crude inventories are set to decline for the rest of the year as OPEC output falls. Yet it also said an accumulation of economic risks from Europe to Argentina may ultimately lead the agency to reduce its outlook for demand.

“The energy complex is on the back foot as investors fret over yesterday’s hefty build in US crude stockpiles," analysts at London broker PVM Oil Associates Ltd. said in a note to clients. “Market players are increasingly adopting a wait-and-see approach as uncertainty continues to plague the global economic and trade outlook."

--With assistance from James Thornhill and Heesu Lee.

To contact the reporters on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net;Grant Smith in London at gsmith52@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Mike Jeffers, Joe Carroll

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