Oil drops on rising US stockpiles

by Jonathan Adams
oil stocks gain

Brent crude oil futures dropped 57 cents, or 0.69%, to $82.59 a barrel, and U.S. WTI crude futures dropped 53 cents, or 0.68%, to $77.85 a barrel

Oil prices dropped in Asian trade on Wednesday as industry data showed a pile-up in crude and fuel inventories in the U.S., a sign of weak demand, and cautious supply expectations emerged ahead of an OPEC+ policy meeting next month.

Brent crude oil futures dropped 57 cents, or 0.69%, to $82.59 a barrel by 0645 GMT. U.S. West Texas Intermediate (WTI) crude futures dropped 53 cents, or 0.68%, to $77.85 a barrel.

Both benchmarks dropped slightly in the prior session on signs of easing supply tightness and weaker global oil demand from an Energy Information Administration forecast report on Tuesday.

U.S. crude stocks rose by 509,000 barrels in the week ended May 3, market sources said, citing American Petroleum Institute (API) numbers. Gasoline and distillate fuel inventories also rose, they added.

API figures released overnight were moderately bearish due to stock builds in both crude and products. Concern over weaker-than-usual U.S. gasoline demand and this stock-build have weighed on the prompt RBOB gasoline crack, ING analysts stated in a client note.

Official U.S. government data on stockpiles is due at 1430 GMT.

Cautious expectations on supply cuts from the OPEC+ ahead of a June 1 policy meeting also weighed on markets.

Oil prices have come under further pressure as noise around OPEC+ production policy grows, the ING analysts added. Expectations are that members will extend their additional voluntary supply cuts beyond the second quarter of this year.

The decline in oil prices since Iran and Israel’s back-and-forth attacks indicates that some of the risk premium in prices has now unwound, said economist Bill Weatherburn from Capital Economics in a client note.

Prices continue to be supported by OPEC+ production cuts but we suspect that members will gradually unwind these cuts from July, pushing oil prices down, he said.

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