Oil prices edge down after surprise rise in US crude stockpiles
By Arathy Somasekhar
HOUSTON (Reuters) -Oil prices slipped on Wednesday after U.S. crude inventories rose unexpectedly and as worries eased slightly that a wider Middle East conflict could threaten production in one of the world's major regions for crude production.
Brent crude futures were down 31 cents, or 0.4%, to $80.38 a barrel by 1:00 p.m. ET (1700 GMT). U.S. West Texas Intermediate crude futures fell 72 cents, or 0.9%, to $77.62 per barrel.
U.S. crude inventories rose by 1.4 million barrels, compared with estimates for a 2.2 million barrel drop, data from the U.S. Energy Information Administration showed. The build was the first after six straight weeks of draws.
"That six week draw was a pretty impressive but that's in the rearview mirror. The fact that we snapped the streak should weigh on prices a little bit," said Robert Yawger, director of energy futures at Mizuho in New York.
Gasoline and distillate inventories fell more than expected.
American Petroleum Institute figures on Tuesday had pointed to a 5.21 million barrel drop last week.
Brent had risen more than 3% on Monday to cap a five-day run of gains, closing at $82.30 a barrel, after hitting a seven-month low of $76.30 at the beginning of last week.
Iran had vowed a severe response to the killing of the leader of Hamas late last month. Three senior Iranian officials have said that only a ceasefire deal in Gaza would hold Iran back from direct retaliation against Israel for the assassination.
TIGHTER SUPPLIES
Israel has neither confirmed nor denied its involvement, but it is fighting in Gaza against Hamas after the group attacked Israel in October. To counter Iran, the United States Navy has deployed warships and a submarine to the Middle East.
"Tighter supplies (from geopolitical tensions) are well priced in," said Dennis Kissler, senior vice president of trading at BOK Financial.
Also hindering oil price gains, the International Energy Agency on Tuesday trimmed its 2025 estimate for oil demand growth, citing the impact of a weakened Chinese economy on consumption. That came after OPEC cut expected demand for 2024 for similar reasons.
A recent string of dismal indicators have dulled expectations for China's economic performance in July, in an ominous sign for the rest of 2024 for the world's second-largest economy.
Globally, jet fuel demand is also poised to soften as a slowdown in consumer spending hits travel budgets, a shift that could weigh on oil prices in the months ahead.
However, U.S. consumer prices rose moderately in July and the annual increase in inflation slowed to below 3% for the first time since early 2021, further strengthening expectations the Federal Reserve will cut interest rates next month.
Lower interest rates decrease the cost of borrowing, which can incentivise economic activity and boost oil demand.
British consumer price inflation picked up less than expected in July, boosting rate cut bets.
Providing a floor for crude prices, Libya's Waha oil company's production was reduced by 115,000 barrels per day due to maintenance on the pipeline pumping oil from the Waha field to Es Sider port, a company source told Reuters on Wednesday.
Source: Investing.com
