Oil trades near six-week low as data shows US stockpiles rose

Singapore - Oil traded near a sixweek low as industry data showing an increase in US crude stockpiles re-affirmed expectations that global markets will be oversupplied in the first part of the year.

Futures slipped as much as 0.7 per cent in New York on Wednesday to near US$58 a barrel as traders focused on the approaching seasonal lull in demand once winter ends, and amid signs of plentiful supply around the world. The American Petroleum Institute (API) reported inventories expanded by 1.1mn barrels last week, according to people familiar with the data.

West Texas Intermediate (WTI) crude for February delivery fell 16 cents, or 0.3 per cent, to US$58.07 a barrel on the New York Mercantile Exchange as of 10:14am in London. The contract closed on Monday at the lowest since December 3. Concerns that the US and Iran were headed for conflict over the killing of an Iranian general, which sent prices soaring earlier this month, have largely dissipated.

Front-month WTI futures were at a discount, or contango, to second-month for a second day, a relationship normally suggesting oversupply.

Brent futures for March settlement dropped 15 cents to US$64.34 a barrel on the ICE Futures Europe exchange after climbing 0.5 per cent on Tuesday. The global benchmark crude traded at a US$6.22 premium to WTI for the same month.

“The preliminary API data is likely weighing on sentiment this morning,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.

The US government’s Energy

Information Administration was set to release official data on stockpiles on Wednesday. Analysts surveyed by Bloomberg forecast that the EIA will report that inventories rose by 1.1mn barrels in the week ended January 10, in line with the API’s numbers. It would be the second straight increase following three weeks of declines.

There were mixed sentiments about the trade pact that President Donald Trump is poised to sign with China, which in theory defuses tensions that weighed on markets throughout last year, but isn’t wholly assuaging concerns. Existing US tariffs on Chinese goods are likely to stay in place until after the presidential election, people familiar said, while Reuters reported the US is drafting more rules to block sales to Huawei Technologies Co.