Crude oil declined on Wednesday following reports that U.S. crude oil inventories grew more than expected in the week ended November 4.
Brent crude dipped $1.68, or 1.7%, to $93.68 a barrel by 5:00 pm Nigerian time while U.S. West Texas Intermediate (WTI) crude had fallen $1.64, or 1.8%, to $87.27 a barrel. The benchmarks fell around 3% on Tuesday.
U.S. crude oil inventories rose by about 5.6 million barrels for the week ended Nov. 4, according to market sources citing American Petroleum Institute figures, while seven analysts polled by Reuters estimated on average that crude inventories would rise by about 1.4 million barrels.
Last week, the market had latched onto hopes that China might be moving toward relaxing COVID-19 restrictions, but over the weekend health officials said they would stick to their “dynamic-clearing” approach to new infections.
COVID-19 cases in Guangzhou and other Chinese cities have surged, with millions of residents of the global manufacturing hub being required to have COVID-19 tests on Wednesday.
“With that (China reopening) narrative getting pushed back, coupled with a considerable build on U.S. inventory data, implying dimming U.S. demand, the recessionary crews are back out in full force this morning in Asia,” Stephen Innes, managing partner at SPI Asset Management, said in a note.
In another bearish sign, API data showed U.S. gasoline inventories rose by about 2.6 million barrels, against analysts’ forecasts for a drawdown of 1.1 million barrels.
The market will get a further view on demand in the world’s biggest economy with the release of official U.S. inventory data from the Energy Information Administration.
“If the large inventory build is confirmed by EIA today, it will be interesting to see if it generates a bigger reaction in the markets, with Brent now trading back in the middle of the $90-$100 range,” said Craig Erlam, senior markets analyst at OANDA.
Meanwhile, supply concerns remain.
The European Union will ban Russian crude imports by Dec. 5 and Russian oil products by Feb. 5, in retaliation for Russia’s invasion of Ukraine. Russia calls its actions in Ukraine a “special operation”.
