Oil declined after an industry report showed a massive increase in US crude stockpiles, ahead of more comprehensive data from the government.
Futures fell by about 1 percent in New York, after closing lower on Tuesday. US inventories swelled by 7.29 million barrels last week, the American Petroleum Institute was said to report. If Energy Information Administration data due Wednesday confirms that, it would be the biggest increase in six weeks. The OECD cut its outlook for global growth again amid trade tensions and political uncertainty.
Though crude prices rallied more than 25% in the first six weeks of the year, the gains have fizzled. The Organisation of Petroleum Exporting Countries and its partners have been cutting output to prevent a glut, and sanctions on members Iran and Venezuela are also tightening supply, but fragile oil demand and booming American output threaten to frustrate their efforts.
“The message is clear: the US remains well-supplied and will continue to do so as oil production inches further into record territory,” said Stephen Brennock, an analyst at PVM Oil Associates in London.
West Texas Intermediate for April delivery slipped as much as 1.3% to $55.80 a barrel on the New York Mercantile Exchange before trading 52 cents lower at $56.04 at 12:48 am in London.
Brent for May settlement was at $65.66 a barrel, down 20 cents, on the London-based ICE Futures Europe exchange. The global benchmark crude’s premium over WTI for the same month narrowed to $9.23 a barrel.
The reported gain in US oil stockpiles is significantly higher than the median forecast of a 1.45-million-barrel increase estimated by analysts surveyed by Bloomberg before the EIA figures were scheduled for release.
The rise in inventories in the world’s biggest crude consumer is undermining efforts by OPEC and its allies to cut production to avert a glut. Saudi Arabia’s energy minister, Khalid Al-Falih, said last week that American inventories are “brimming” and it’s leaning toward extending production curbs beyond June.
Investors are also looking for a breakthrough on U.S.-China trade talks that have dragged on for the past several weeks. President Donald Trump is ready to walk away from a trade deal with China unless he secures a “perfect deal,” said Secretary of State Mike Pompeo.
“The US-China trade talks are a complicated process,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “I think it might be dawning on oil traders that a comprehensive agreement might be weeks or even months away, rather than the days they might have been looking at.”