Oil Futures Fall Slightly on Build in Inventories

By Adedapo Adesanya

Oil futures finished slightly lower on Wednesday, July 22, pulling back gains after hitting a four-month the previous day.

This came from an unexpected weekly climb in US crude stockpiles, which followed a slip in fuel demand as data showed that the recent outbreak in coronavirus cases has started to hit US consumption.

The international benchmark, Brent crude, consequently dropped 4 cents or 0.09 per cent to sell at $44.28 per barrel, while the US West Texas Intermediate (WTI) crude lost five cents or 0.12 per cent to settle at $41.87 per barrel.

Both crude futures had earlier finished at their highest settlements since early March after the European Union reached a deal that would boost the continent’s economy.

However, the market reacted as the Energy Information Administration (EIA) said on Wednesday that crude inventories rose by 4.9 million barrels in the week to July 17 to 536.6 million barrels, compared with expectations of 2.1 million-barrel drop. Also, The American Petroleum Institute (API) reported a climb of 7.5 million barrels.

The EIA data also showed crude stocks at the Cushing, Oklahoma, storage hub edged up by about 1.4 million barrels, while total domestic oil production climbed by 100,000 barrels to 11.1 million barrels a day last week.

Analysts note that this increase in US inventories may raise questions over a decision by the Organization of the Petroleum Exporting Countries and their allies, OPEC+ to taper production cuts from 9.7 million barrels per day to 7.7 million barrels starting from August.

Prices were also pressured by renewed tensions between the US and China, a factor that raised the potential for a decline in energy demand.

A fresh dispute between the two countries put pressure on prices after the United States told the Chinese consulate in Houston to shut down while there are reports that China was considering closing the US consulate in Wuhan.

This could be seen as harmful to prices as China is one of the biggest importers of oil, and an escalation can affect trading of commodities, one of which is crude oil.