Oil extended losses below $54 a barrel on signs of a weakening economy and an industry report pointing to rising U.S. crude inventories.
Futures in New York fell as much as 0.6 percent after a 1.7 percent drop on Tuesday. A gauge of demand for U.S. service industries hit a one-year low in January, following data on Monday that showed an unexpected drop in factory activity. Meanwhile, the American Petroleum Institute was said to report that the nation’s crude inventories rose 2.51 million barrels last week. Investors largely shrugged off President Donald Trump’s address to the country.
Oil has traded in a tight range above $50 after its best start to a year in almost two decades on optimism about output cuts by the Organization of Petroleum Exporting Countries. Meanwhile, U.S. sanctions on Venezuela have raised the risk of further supply disruption. Still, lingering concerns over record output and rising inventories in the U.S. as well as a trade war between the U.S. and China are weighing on prices.
“Crude markets remain in wait and see mode before EIA data” as Trump’s State of the Union address was mostly about an extension of existing policy, said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp. “Unless the U.S. and China resolve the trade war, rising concerns over demand could put a lid on prices as data like the ISM non-manufacturing data will keep getting worse.”
West Texas Intermediate crude for March delivery fell as much as 32 cents to $53.34 a barrel on the New York Mercantile Exchange and traded at $53.45 at 8:24 a.m. in London. The contract fell 90 cents to $53.66 on Tuesday.
Brent for April settlement declined 33 cents to $61.65 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 53 cents to $61.98 on Tuesday. The global benchmark crude was at a $7.91 premium to WTI for the same month.
In the U.S., nationwide oil stockpiles probably increased 1.85 million barrels last week, according to a Bloomberg survey of analysts. If Energy Information Administration data due Wednesday confirms that, it will be the third consecutive weekly gain.
Meanwhile, a report Tuesday showed that the Institute for Supply Management’s non-manufacturing index fell 1.3 points to 56.7, the lowest since July and below expectations. While the gauge held above the 50 line between expansion and contraction, a measure of business activity fell to a six-month low. Eleven of 18 industries reported growth, the least in two years.
In Washington, among few new developments revealed in the State of the Union speech was a planned meeting between the U.S. president and North Korea’s leader, Jogmec’s Nogami said. Trump said he’ll meet with Kim Jong Un on Feb. 27-28 in Vietnam, ending much of the months-long mystery over the details of their second summit.
Other oil-market news: U.S. refiners are eager to buy Canadian heavy crude to replace supplies they had been importing from Venezuela that are now blocked by Trump administration sanctions. Crude shipments to the U.S. from OPEC and its partners fell to 1.41 million barrels a day in January, the lowest in five years, according to data from cargo-tracking and intelligence company Kpler.