Oil prices fall on build in American crude stocks
Experts also concerned weaker China demand could pressure market
Oil prices fell on Wednesday as an unexpected build in US crude inventories weighed on markets, along with concerns that Chinese crude demand could falter as the Chinese government clamps down on alleged tax evasion in the oil industry.
International Brent crude oil futures were trading at $ 49.32 a barrel at 2: 14 pm Beijing time, down 1.3 percent, from their last close. US West Texas Intermediate crude was down 1.5 percent at $ 47.38 a barrel.
Robust Chinese crude demand growth has been driven by independent refiners, which began to import crude in June after obtaining government crude import quotas and licenses.
But the Chinese government’s crackdown on alleged tax evasion in the oil industry, targeting the teapots, threatens to put a lid on Chinese demand.
“The question now is whether the teapots will start cutting runs,” a Singapore- based trader said, adding that falling Chinese demand would be a double whammy for the oversupplied crude market.
Reinforcing concerns about market oversupply, US crude stockpiles surprisingly rose last week, even though gasoline inventories fell sharply, according to data released Tuesday by industry group the American Petroleum Institute.
“We are seeing a little reaction on the API data which has posted higher inventories,” said Ric Spooner, chief market analyst at CMC Markets.
Crude prices had risen on Tuesday after Reuters reported that Iran was sending positive signals that it could support joint action to prop up the oil market.
But analysts and traders remain skeptical that producers will come to an agreement at a meeting in Algeria next month as various OPEC members continue to have individual agendas to push.
Iraq’s prime minister said on Tuesday that the country had not yet reached its full oil market share, suggesting his government would not restrain crude output as part of any possible OPEC agreement to lift prices.
“I really can’t see the sense for Saudi, in particular, to actually have some meaningful constraint on production because there is quite a lot of capacity of US shale to come on quite quickly,” Spooner said, adding that he could see prices drifting closer to $ 45 a barrel over the next few days.