Oil prices slip after surprising rise in US stocks

London — Oil prices fell on Wednesday, ending a three-day rally as an unexpected rise in US oil inventories sparked demand concerns and investors awaited inflation data for a steer on US interest rates.

Brent crude dropped $1.01, or 1.3%, to $76.43 a barrel by 8.55am GMT while US West Texas Intermediate (WTI) crude fell 99c, or 1.3%, to $72.72.

In a possible sign of weakening demand, US crude inventories rose by about 3.6-million barrels in the week ended May 5 while gasoline stockpiles rose by 399,000 barrels, the American Petroleum Institute was reported as saying by market sources on Tuesday.

The data defied expectations from eight analysts polled by Reuters for a drawdown of 900,000 barrels of crude and a 1.2-million barrel drop in petrol stocks. US government data on oil inventories is due on Wednesday.

The surprising US inventory build along with lower crude imports and April's softer export growth in China exacerbated worries about global oil demand.

“Crude futures were unwinding Tuesday’s modest gains early Wednesday as economic worries occupied centre stage, especially over the world’s two largest economies,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

The market is awaiting US consumer price index (CPI) figures for April on Wednesday.

New York Fed president John Williams said inflation remained too high and the central bank would raise rates again if necessary, even though the Federal Reserve dropped guidance about the need for future hikes.

The market is also awaiting the monthly oil report from Opec on Thursday for clues on whether the group and its allies will need to cut output again to prop up prices.

Opec and its allies, together known as Opec+, agreed in April to cut production by 1.16-million barrels per day (bpd) from May to the end of 2023.

Meanwhile, markets were monitoring US President Joe Biden and top Republican legislators’ comments on raising the $31.4-trillion US debt ceiling, fearing an unprecedented default if Congress does not act in the next three weeks.

Reuters