Oil Dips After Industry Data Shows Surprise Crude Stock Build

The rally represents only limited relief for oil, which is down almost 40 percent from a four-year high in October.

Jessica Summers

28 Dec 2018, 01:35 PM IST

Oil Dips After Industry Data Shows Surprise Crude Stock Build

A worker pours liquid oil into a barrel at the delayed coker unit of a refinery (Photographer: Akos Stiller/Bloomberg)

(Bloomberg) -- Crude slid after industry data showed an unexpected increase in U.S. oil inventories.

Futures in New York edged lower after the industry-funded American Petroleum Institute was said to report U.S. crude inventories increased 6.92 million barrels last week, counter to analyst expectations. A supply build of that size would be the largest since early November if Energy Information Administration data confirms it on Friday.

“OPEC is clearly worried over the price already and this would just amplify their concerns,” said James Williams, president of London, Arkansas-based energy researcher WTRG Economics. A crude build likely would mean the U.S. received more imports than anticipated, he said.

Earlier in the session, oil tracked declines in U.S. equities. Traders have been on edge this week amid giant swings in both stocks and oil. On Monday, the U.S. benchmark crude fell more than 7 percent before jumping more than 10 percent on Wednesday.

“What’s going on with the overall economy and because GDP is so correlated with oil demand, that’s really what’s driving the bus lately,” said Stewart Glickman, an energy equity analyst at CFRA Research. “Are we driving into a recession or are things going to stabilize and be a somewhat steady state?”

U.S. benchmark crude is on track for the largest quarterly decline since 2014 amid fears that the ongoing trade war between the U.S. and China will hit demand. At the same time, some investors doubt that the Organization of Petroleum Exporting Countries’ deal to limit output with its allies will help tighten supplies. Producers aim to publish a statement in January on the implementation of the agreement, Russia’s Energy Minister Alexander Novak said.

West Texas Intermediate crude for February delivery traded at $45.26 a barrel at 4:43 p.m. after trading at $45.61 in the minute before the API report was released. Prices settled at $44.61 a barrel on the New York Mercantile Exchange. Total volume traded on Thursday was about 16 percent below the 100-day average.

A measure of oil market volatility jumped to the highest level in more than a month.

Brent for February settlement slid $2.31 to end the session at $52.16 a barrel on London’s ICE Futures Europe exchange. The global benchmark crude traded at a $7.55 premium to WTI.

In the U.S., crude inventories probably fell 3.25 million barrels last week, according to a Bloomberg survey of analysts.

The API was also said to report Cushing, Oklahoma, crude supplies rose 1.76 million barrels, while gasoline inventories climbed 3.67 million barrels and distillate stocks fell 598,000 barrels.

Other oil-market news:
Gasoline futures fell 2 percent to settle at $1.3040 a gallon. Crude’s recent sell-off is a grim reminder that OPEC’s management of the oil market isn’t foolproof. The group’s Dec. 7 decision to curb output among members and allied producers was supposed to prop up sinking prices. Instead, it resulted in the worst post-cut price decline in a decade. Two top officials at Unipec, one of China’s most powerful trading companies, were suspended this week following losses on bets related to oil prices in the second half of the year, according to people with knowledge of the matter.

Other oil-market news:

Gasoline futures fell 2 percent to settle at $1.3040 a gallon.
Crude’s recent sell-off is a grim reminder that OPEC’s management of the oil market isn’t foolproof. The group’s Dec. 7 decision to curb output among members and allied producers was supposed to prop up sinking prices. Instead, it resulted in the worst post-cut price decline in a decade.
Two top officials at Unipec, one of China’s most powerful trading companies, were suspended this week following losses on bets related to oil prices in the second half of the year, according to people with knowledge of the matter.

--With assistance from Tsuyoshi Inajima and Grant Smith.

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net

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