Oil extended losses after a surprise jump in American crude inventories alleviated concerns over a supply crunch, while the demand outlook remained bleak as there was no let up in US-China tensions.
Futures in New York fell as much as 1 per cent after tumbling 2.7 per cent on Wednesday, the biggest drop in almost three weeks. American stockpiles rose by 4.7 million barrels to the highest level since mid-2017 last week despite expectations for a drop, while fuel inventories also climbed. Asian stocks tracked US equities lower after the White House was said to be considering cutting off the flow of vital U.S. technology to five Chinese surveillance companies.
Oil is on course for its first monthly loss this year after a dramatic escalation in the trade dispute between the world’s two biggest economies jeopardized the outlook for global growth. While there’s no shortage of supply risks -- including the possibility the Organization for Petroleum Exporting Countries will extend its output curbs or that rising tension in the Middle East will disrupt energy flows -- swelling US stockpiles are mitigating those concerns.
“Both crude and fuel inventories rose, contrary to market expectations, suggesting the economy is getting worse,” said Naohiro Niimura, a partner at Market Risk Advisory in Tokyo. “The American economy may be heading into a cyclical slowdown.”
West Texas Intermediate crude for July delivery fell 53 cents, or 0.9 per cent, to $60.89 a barrel on the New York Mercantile Exchange at 7:24am in London after being down as much as 63 cents earlier. The contract dropped $1.71 to close at $61.42 on Wednesday.
Brent for July settlement declined 62 cents, or 0.9 per cent, to $70.37 a barrel on the London-based ICE Futures Europe exchange. The contract lost $1.19 to $70.99 on Wednesday. The global benchmark crude was at a $9.46 premium to WTI.
Along with the increase in US crude inventories, Energy Information Administration data released Wednesday showed gasoline and distillate stockpiles also defied forecasts to rise last week. American crude production climbed by 100,000 barrels a day to 12.2 million barrels a day, near the record high reached last month.
The MSCI Asia Pacific Index of stocks headed for its lowest close in almost four months as relations between Washington and Beijing continued to worsen. China’s flagship People’s Daily published two commentaries assailing American moves to curb Chinese companies, a day after President Xi Jinping called on citizens to join a “new Long March,” a phrase used to characterize achieving progress despite hardship.
