Oil falls on large US crude build, euro zone data
Oil prices slipped on Wednesday after a much larger build in U.S. crude inventories than expected and weak euro zone economic figures that weighed on demand sentiment, reversing gains from the previous three sessions. Brent crude LCOc1 was down 42 cents to $62.54 a barrel by 11:05 a.m. EST (1605 GMT). West Texas Intermediate crude CLc1 lost 12 cents at $57.11 per barrel. The slide followed data from the Energy Information Administration (EIA) showing U.S. crude inventories rose by 7.9 million barrels in the week to Nov. 1, compared with analysts’ expectations for an increase of 1.5 million barrels.
Gasoline stocks, meanwhile, dropped by 2.8 million barrels, compared with a forecast of a 1.8 million-barrel drop and distillates, which include diesel and heating oil, lost 622,000 barrels, versus expectations for a 949,000-barrel drop, the EIA said. This is definitely a shocking number, even if you’re bearish you’re shocked,” said Phil Flynn, an analyst at Price Futures Group. The only saving grace is the drawdown in gasoline supplies that put us below the five-year average, but that’s offset by the fact that the distillate inventories – even though they fell – they’re not as far below the five-year average as they were a week ago.
A drop in crude exports and an increase in imports last week worsened the build, Flynn said. Meanwhile, the International Monetary Fund (IMF) said euro zone economic growth was set to slow more than expected as the bloc’s manufacturing crisis could spill over to the larger services sector under global trade tensions.
Data on Wednesday showed Germany’s services sector barely grew in October, while euro zone business activity expanded slightly faster than expected last month but remained close to stagnation. Middle East tensions offered some support, as Iran started to inject uranium gas into centrifuges at an underground nuclear facility, further distancing itself from a 2015 nuclear deal between Tehran and world powers.
The United States pulled out of the nuclear pact last year and has imposed tough new sanctions on Iran.
“Alongside the continued rolling back of its nuclear commitments, the OPEC nation may be tempted to cause further supply disruptions in the Middle East in a bid to drive up prices,” PVM analyst Stephen Brennock said. “Accordingly, conditions are ripe for tensions in the region to escalate and for the geopolitical risk premium to strike back with a vengeance.” However, Russian Energy Minister Alexander Novak said the current oil price of more than $60 per barrel showed that markets were stable.