By Heesu Lee and Alex Longley

Jul 3, 2019

Oil declined as a smaller-than-expected draw in U.S. inventories added bearish sentiment to a market already reeling from gloomy economic news.Futures fell as much as 1.5% in New York after gaining 1.9% on Wednesday. While American crude and gasoline stockpiles both fell for a third week, they dropped less than forecast in a Bloomberg survey. Anxieties over demand resurfaced earlier this week following a slew of sluggish economic indicators from the U.S., China and Europe, even as the Organization of Petroleum Exporting Countries and its allies agreed to extend output cuts into 2020.

U.S. crude stockpiles extend drop from highest level in almost two years

Oil is down for the week after plunging 4.8% on Tuesday, its worst decline on the day of an OPEC meeting in more than four years. While the group’s Secretary-General Mohammad Barkindo described the drop as an “anomaly,” Bank of England Governor Mark Carney warned of dangers from rising protectionism around the world and said there could be a “widespread slowdown” that may require a major economic-policy response.

“The OPEC deal was more or less what the market deemed to be necessary,” said Ole Sloth Hansen, head of commodities strategy at Saxo Bank A/S. “The weakness in U.S. and Chinese data early in the week, together with yesterday’s smaller-than-expected draw, only added to demand worries.”

West Texas Intermediate oil for August delivery lost 22 cents, or 0.4%, to $57.12 a barrel on the New York Mercantile Exchange as of 10:28 a.m. London time. The contract gained $1.09 on Wednesday, recovering some ground after slumping the most since May 31 in the previous session.

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Brent for September settlement declined 7 cents, or 0.1%, to $63.75 a barrel on the ICE Futures Europe Exchange, after adding 2.3% on Wednesday. The benchmark global crude traded at a premium of $6.50 to WTI for the same month.

See also: U.S. Oil Inventory Buildup Is Looking Increasingly Gassy

U.S. crude inventories shrank by 1.09 million barrels last week, according to the Energy Information Administration. The Bloomberg survey had predicted a loss of 3 million barrels. Gasoline stockpiles fell by 1.58 million barrels, compared with a forecast for a 2.4 million-barrel loss.

U.S. oil production also remains near a record-high. Output increased to 12.2 million barrels a day last week, resuming gains after dropping since the start of June, the EIA said. Crude exports from the country fell back to below 3 million barrels a day.

Other oil-market news
Saudi Arabia and Kuwait are the closest in years to restoring oil output from the neutral zone shared by the neighboring nations after making a breakthrough in recent talks, according to people familiar with the matter. One of the great sources of hope for oil bulls — the tightest market for physical crude supply in years — is slumping fast. Gibraltar officials and a group of British Royal Marines seized an oil tanker suspected of breaching European Union sanctions against Syria.

Other oil-market news

Saudi Arabia and Kuwait are the closest in years to restoring oil output from the neutral zone shared by the neighboring nations after making a breakthrough in recent talks, according to people familiar with the matter.
One of the great sources of hope for oil bulls — the tightest market for physical crude supply in years — is slumping fast.
Gibraltar officials and a group of British Royal Marines seized an oil tanker suspected of breaching European Union sanctions against Syria.