SINGAPORE – Oil prices fell on Wednesday after US industry data showed a surprise build in crude inventories, but expectations for firmer demand next year prevented a bigger fall in prices.
The decline followed a gain of more than 1% in the previous session as the “phase one” US-China trade deal announced last week eased pressure on the oil benchmarks. Prior to the deal, oil markets were hampered by worries over the economic impact of the trade dispute between the world’s two biggest oil consumers.
Brent crude futures LCOc1 dropped 33 cents, or 0.5%, to $65.77 a barrel by 0515 GMT on Wednesday. The international benchmark rose 1.2% to $66.10 a barrel on Tuesday.
West Texas Intermediate (WTI) crude futures CLc1 fell 43 cents, or 0.71%, to $60.51 per barrel.
“The sizzling oil market rally came to a grinding halt after an unexpected climb in the weekly US crude inventory report,” said Stephen Innes, market strategist at AxiTrader. However, he added that “it’s unlikely to be a game-changer.”
“Investors have transcended the trade deal-inspired relief rally euphoria, and are now banking on a fundamental demand-driven shift that could quicken the pace of the oil market rebalancing in the first quarter of 2020.”
US crude inventories climbed 4.7 million barrels in the week to Dec. 13 to 452 million, compared with analysts’ expectations for a draw of 1.3 million barrels, data from industry group the American Petroleum Institute showed.
But a drop in official inventory data from the US Energy Information Administration (EIA) due later on Wednesday could give oil more upward impetus, said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA.
The drop in prices Wednesday morning “are minuscule, with oil’s price action continuing to be constructive,” Halley said.
Deeper production cuts coming from the Organization of the Petroleum Exporting Countries and allies such as Russia – a group known as OPEC+ – also continued to support market sentiment and prevented a further slide in prices.
The OPEC+, which has cut production by 1.2 million barrels per day (bpd) since Jan. 1 this year, will make a further oil supply cut of 500,000 bpd from Jan. 1, 2020, to support the market.