Oil Slips on Unexpected U.S. Inventory Build, Saudis Limit Losses

Oil Slips on Unexpected U.S. Inventory Build, Saudis Limit Losses
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By Ambar Warrick

Investing.com– Oil prices fell on Wednesday after data indicated that U.S. crude inventories grew more than expected last week, although signs of robust gasoline demand and a warning on tighter supplies from Saudi Arabia kept losses in check.

American Petroleum Institute (API) data on Tuesday showed that U.S. crude inventories grew by 4.5 million barrels in the week to October 21, more than expectations for a build of 200,000 barrels.

While the reading likely reflects drawdowns from the Strategic Petroleum Reserve (SPR), it also signals a near-term surplus in oil supply, which is negative for prices.

The reading comes ahead of an official report that is expected to show U.S. crude inventories grew 1 million barrels last week.

London-traded Brent Oil Futures fell 0.7% to $91.09 a barrel, while West Texas Intermediate crude futures fell 0.5% to $84.86 a barrel by 22:09 ET (02:09 GMT). Both contracts rose slightly on Tuesday.

Crude markets marked a weak start to the week after a slew of slower-than-expected manufacturing readings brewed concerns over worsening crude demand. Data from China, the world’s largest crude importer, also showed that oil shipments to the country slowed drastically this year.

Oil prices fell sharply from annual highs as fears of slowing demand and increased U.S. supplies weighed on markets. But prices have rebounded in recent weeks after a supply cut by the Organization of Petroleum Exporting Countries and allies (OPEC+).

Tuesday’s API data also showed that gasoline inventories fell sharply last week, indicating that U.S. fuel demand remains steady. Recent data from the U.S. Energy Information Administration showed that U.S. gasoline inventories touched an eight-year low as of mid-October.

Further supporting crude prices, Saudi Arabia’s Energy Minister Abdulaziz bin Salman warned that Washington’s release of SPR supplies would result in more pain in the coming months. The Biden administration began drawing down heavily from the SPR this year to counter a spike in oil prices, and has threatened more releases in response to the OPEC+ supply cut.

The SPR is currently at its lowest level since 1984, which has drawn flak from Biden’s political rivals. While the U.S. government recently outlined plans to replenish the SPR, it will only do so when oil prices are substantially below current levels.

Such a scenario may be unlikely in the near-term, given that the OPEC+ threatened more supply cuts to keep prices elevated. Oil supplies may also tighten further on more restrictions against Russia.

Source: Investing.com