Oil fell on Wednesday after an industry report showed an unexpected build in US crude inventories, but optimism around the signing of the first phase of a US-China trade deal capped a deeper slide in prices. International benchmark Brent crude futures LCOc1 dropped 19 cents, or 0.3%, to $64.08 a barrel by 0145 GMT on Wednesday. Brent rose about 1% on Tuesday.
West Texas Intermediate (WTI) crude futures CLc1 fell 17 cents, or 0.29%, to $58.24 per barrel. Wednesday’s decline reversed two days of gains with WTI climbing 1.1% through Tuesday and Brent gaining 1.4% during the period on the expectation that China and the United States, the world’s two biggest crude users, would sign a preliminary agreement that would begin to end their 16-month trade war.
US crude stocks rose by 3.6 million barrels in the week to November. 22 to 449.6 million, compared with analysts’ expectations for a decrease of 418,000 barrels, data from industry group the American Petroleum Institute showed. Official inventory data from the US Energy Information Administration (EIA) is due later on Wednesday. The surprise crude build disappointed the oil bulls and likely encouraged some end of day position squaring, said Stephen Innes, market strategist at AxiTrader.
But oil prices continue to be driven mainly by US-China trade news flow, which remains hugely encouraging even more so after President Trump sounded extremely optimistic, hinting that a deal was just around the corner. The United States and China are close to agreement on the first phase of a trade deal, US President Donald Trump said on Tuesday, after top negotiators from the two countries spoke by telephone and agreed to keep working on remaining issues.
The trade dispute between Washington and Beijing, the world’s two biggest economies, has clouded the outlook for future oil demand and even as a deal is yet to be finalized, any positive headline tends to support the market. The Organization of the Petroleum Exporting Countries (OPEC) and its allies in a production cutting pact, a group known as OPEC+, will begin holding meetings on Dec. 4 in Vienna to examine its output policy.
OPEC plans to meet on December 5 and then a meeting of the OPEC+ group on December 6 will make a final announcement on the future policy. The OPEC+ group agreed to cut oil output by 1.2 million barrels per day until March 2020 to boost prices. They are expected to extend the policy, possibly until June.