An oil refinery worker. Picture: REUTERS/DARREN WHITESIDE
An oil refinery worker. Picture: REUTERS/DARREN WHITESIDE

Singapore — Oil eased on Wednesday after an industry report showing a surprise build in US crude stockpiles, but hopes surrounding the signing of the first phase of a US-China trade deal prevented a bigger drop in prices.

Brent crude futures dropped 15c, or 0.23%, to $64.12 a barrel by 6.21am SA time, while West Texas Intermediate (WTI) crude futures fell 16c, or 0.27%, to $58.25 per barrel.

Wednesday’s decline reversed two days of gains, with WTI climbing 1.1% through Tuesday and Brent gaining 1.4% during the period, on the expectation that China and the US, the world’s two biggest crude oil users, would soon sign a preliminary agreement beginning an end to their 16-month trade war.

But data from industry group the American Petroleum Institute late on Tuesday showed US crude stocks rose by 3.6-million barrels in the week to November 22 to 449.6-million, compared with analysts’ expectations for a decrease of 418,000 barrels.

“Strong builds in US inventories have kept bullish gains measured as markets remain cautious over shaky economic fundamentals and demand-side concerns,” said Benjamin Lu, analyst at Singapore-based brokerage Phillip Futures.

Later on Wednesday the US Energy Information Administration (EIA) is due to publish official inventory data.

“If the [EIA] numbers are similar to the API, this would be the fifth straight week of stock builds, and would not be the most constructive reading for WTI as we head into the Thanksgiving holiday,” ING analyst Warren Patterson said in a note.

Still, optimism on global trade, along with market expectations for an extension in supply curbs by Opec and associates, have supported oil prices, Phillip Futures analyst Lu said.

US President Donald Trump said on Tuesday that the US and China are close to agreement on the first phase of their trade deal, after top negotiators from the two countries spoke by telephone and agreed to keep working on remaining issues.

Elsewhere Opec and its production-cutting allies, a grouping known as Opec+, will begin holding meetings on December 4 in Vienna to examine output policy.

A meeting of the Opec+ group on December 6 will make a final announcement on the future policy, with an extension of curbs, possibly until June, the expected outcome.

Reuters