Oil loses ground on increase in US crude and fuel stocks

Singapore — Oil prices fell in early Asian trade on Wednesday as industry data showed a pile-up in both crude and fuel inventories in the US, a sign of weak demand, and cautious supply expectations emerged ahead of an Opec+ policy meeting in June.

Brent crude oil futures fell 30c, or 0.36%, to $82.86 a barrel by 3.48am GMT. US West Texas Intermediate crude futures fell 25c, or 0.32%, to $78.13 a barrel.

Both benchmarks fell marginally in the previous session on signs of easing supply tightness and weaker global oil demand from an Energy Information Administration (EIA) forecast report on Tuesday.

US crude stocks rose by 509,000 barrels in the week ended May 3, market sources said citing American Petroleum Institute (API) figures. Petrol and distillate fuel inventories also rose, they said.

“API numbers released overnight were moderately bearish due to stock builds in both crude and products.... Concern over weaker-than-usual US gasoline [petrol] demand and this stock-build have weighed on the prompt RBOB gasoline crack,” said ING analysts in a client note.

Official US government data on stockpiles is due at 2.30pm GMT. Analysts polled by Reuters expect US crude oil inventories to have fallen by about 1.1-million barrels last week.

Cautious expectations on supply cuts from oil cartel Opec and associates (Opec+) ahead of a June 1 policy meeting also weighed on markets.

“Oil prices have come under further pressure as noise around Opec+ production policy grows.... Expectations are that members will extend their additional voluntary supply cuts beyond the second quarter of this year,” said ING analysts.

Meanwhile, the hope of a ceasefire in Gaza have also put pressure on oil prices in recent sessions, with some analysts saying that the risk premium on oil declined in tandem.

“The fall in oil prices since Iran and Israel’s back-and-forth attacks suggests that some of the risk premium in prices has now unwound,” said economist Bill Weatherburn from Capital Economics in a client note.

“Prices continue to be supported by Opec+ production cuts but we suspect that members will gradually unwind these cuts from July, pushing oil prices lower,” he said.

The US believes negotiations on a Gaza ceasefire should be able to close the gaps between Israel and Hamas. US Central Intelligence Agency Director Bill Burns will travel to Israel on Wednesday for talks with the Israeli Prime Minister Benjamin Netanyahu and other top officials, a source familiar with the matter said.

Some analyst expectations that short-term demand remains well supported, however, limited overall price declines.

“Much talk of economic run cuts in recent weeks is overblown in our opinion, with margins still healthy enough, which means rather that Asian demand could rather pick up once turnarounds peak and diminish,” said Sparta Commodities analyst Neil Crosby. 

Reuters