Oil prices drop due to surprise hike in US crude stocks
Oil prices dropped due to an unforeseen build in crude inventory in the United States and a slow progress in the US-China trade deals made investors wait on whether new tariffs on Chinese goods will be placed.
Brent futures LCOcl slid 0.7%, or 44 cents, priced at $63.90 per barrel by 0342 GMT. US West Texas Intermediate crude CLcl fell 0.6%, or 33 cents, priced at $58.91 per barrel, from a more than two-month high.
“At this time, everyone was expecting we would have strong draws in the inventory, but it was a build,” oil risk manager at Japanese trading house Mitsubishi Corp Tony Nunan said.
US crude stocks showed a surprise hike, as well as gasoline and distillate inventories, as shown by data from the American Petroleum Institute.
Crude inventories increased to 447 million, after 1.4 million barrels were added. This was a contradictory to analysts’ expectation for crude inventory to fall 2.8 million barrels.
The trade tensions between US and China has continued to raise uncertainties on demand, as the deadline for the next US tariffs on Chinese imports comes this Dec. 15.
As the market is expected to become over-supplied next year on rising shale output and new projects, an additional round of tariffs will surely affect demand and prices, Nunan said.
“The demand slowdown in growth, a lot of it seems to be coming from the trade war. If tariffs go into effect, sentiments will turn bearish again.”
Next year the US plans to become a net exporter of fuel and crude, the EIA said, because of a rise in production that allowed the US to become less dependent on foreign soil.
Adding to global supply, US producers Hess Corp and Exxon Mobil Corp plan to export crude oil from Guyana for the first time in January to February. This will be a milestone for Latin America’s newest oil producer.
Aside from oil prices and supply, investors also eye major events coming such as the British election and the US and European Central Bank meetings for more trading news.