Oil futures headed lower early Wednesday, pulling back after crude settled around a four-month high Tuesday on a report showing U.S. energy stock piles rose more than than expected. Rising tensions between the U.S. and China also may cause some headwinds for crude.
The American Petroleum Institute reported late Tuesday that U.S. crude supplies rose by 7.5 million barrels for the week ended July 17, according to sources. The update on energy inventories comes ahead of the more closely followed government data on supplies from the Energy Information Administration will be released Wednesday at 10:30 a.m. Eastern Time. The EIA data are expected to show crude inventories declined by 1.9 million barrels last week, according to analysts polled by S&P Global Platts.
The API data, meanwhile, showed gasoline stockpiles fell by 2 million barrels, while distillate inventories declined by nearly 1.4 million barrels. Crude stocks at the Cushing, Okla. storage hub, meanwhile, edged up by 716,000 barrels for the week, sources said.
Naeem Aslam, chief market analyst at AvaTrade said that the resurgence in the price of oil recently could foster more supplies that could eventually prove problematic to the bullish uptrend for crude.
“On the supply side, you also need to be cautious because higher oil prices are likely to bring more oil on the market because the US shale oil production becomes profitable,” he wrote in a daily note.
Commodity investors were watching Sino-American relations after China’s Foreign Ministry said the U.S. had instructed China to close its consulate in Houston, highlighting simmering tensions between Beijing and Washington that could be viewed as harmful to crude values. China is one of the biggest importers of oil.
Oil prices on Tuesday finished at their highest settlement since early March, as investors had grown more positive about the world’s ability to address the COVID-19 pandemic which has crushed demand for oil and its byproducts.
On Wednesday, September WTI crude CLU20, -1.50% CL.1, -1.59%, which is now the front month contract after the August contract expired on Tuesday, was 63 cents, or 1.5%, lower at $41.29 a barrel on New York Mercantile Exchange after settling up 2.4% on Tuesday. The front-month contract ended at its highest level since March 5, according to Dow Jones Market Data.
September Brent crude BRN.1, -1.26% on ICE Futures Europe gave up 55 cents, or 1.3%, $43.76 a barrel, following a 2.4% gain in the previous session. The global benchmark ended Tuesday trade at the highest level since March 6.