Oil falls on high US production, despite strong demand signals
Brent futures were down 69 cents to $81.78 a barrel at 1346 GMT, while U.S. West Texas Intermediate (WTI) crude was down 78 cents to $77.48.
In signs of healthy U.S. crude supply, American Petroleum Institute figures on Tuesday showed rising crude oil and gasoline inventories last week, according to market sources.
The U.S. Energy Information Administration (EIA) will also release on Wednesday its first oil inventory report in two weeks, after a delay last week due to a systems upgrade.
In good news for demand, China’s economic activity perked up in October as industrial output increased at a faster pace and retail sales growth beat expectations, an encouraging sign for the world’s second-largest economy.
The International Energy Agency joined the Organization of the Petroleum Exporting Countries and its allies (OPEC+) in raising oil demand growth forecasts for this year, despite projections of slower economic growth in many major countries.
“With China being a scapegoat for much of the world’s lack of industrial demand, this glimmer of light ought to aid oil’s progress but the reluctance is so far winning out,” John Evans of oil broker PVM said in a note. Downward pressure on oil prices may come from the supply side, with the United States “likely at peak production for crude,” while the delayed release of its oil data makes the investment situation more opaque, Evans said.
The Financial Times reported on Wednesday that Denmark will be tasked with inspecting and potentially blocking tankers with Russian oil sailing through its waters under new European Union plans, as the West explores more ways of enforcing a price cap on Moscow’s crude.
However, it is still to be seen how Denmark will enforce this.
A softer U.S. inflation reading that bolstered expectations for an interest rate cut by the Federal Reserve next spring sent the U.S. dollar down to a 2-1/2 month low against a basket of other currencies. A weaker dollar can boost oil demand by making crude cheaper for buyers using other currencies.
British inflation also cooled in October, and more than expected, reinforcing expectations that the Bank of England’s hiking cycle has ended, with the Federal Reserve and European Central Bank also seemingly having reached the peak for interest rates.
Elsewhere, the European Union reached a deal on Wednesday on a law to place methane emissions limits on Europe’s oil and gas imports from 2030, pressuring international suppliers to clamp down on leaks of the potent greenhouse gas.
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