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Oil prices dropped Wednesday after official U.S. inventory data posted a rise in the latest week that defied analyst predictions for a drawdown.
Earlier, oil prices for the U.S. and global benchmarks had edged higher as cautious optimism for a trade pact between the U.S. and China continued to prop up commodities prices and sent stock markets to records in recent days.
West Texas Intermediate crude futures for January delivery CLF20, -0.55% closed down 30 cents, or 0.5%, at $58.11 a barrel on the New York Mercantile Exchange. The contract is up more than 7% for the month to date. January Brent crude BRNF20, +0.02%, the global marker, fell 21 cents, or 0.3%, at $64.06 a barrel on ICE Futures Europe. It trades up about 6.4% in November so far.
U.S. markets are closed Thursday for the Thanksgiving holiday and will close early on Friday.
U.S. crude supply rose last week as refineries cut output, while gasoline and distillate inventories rose, the Energy Information Administration said on Wednesday.
Crude inventories rose by 1.6 million barrels in the week ended Nov. 22. Refinery crude runs fell by 101,000 barrels per day, EIA data showed. Gasoline stocks rose by 5.1 million barrels.
The American Petroleum Institute had reported late Tuesday that U.S. crude supplies rose by roughly 3.6 million barrels for the week ended Nov. 22, according to sources. That result contradicted analyst expectations and may have prepped the market Wednesday for the build in the official data. The API data also reportedly showed a stockpile rise of 4.3 million barrels for gasoline, along with a supply decline of 665,000 barrels for distillates.
Analysts at S&P Global Platts had predicted there could be a 600,000-barrel draw in the latest release. The last outright drawdown in the official data was in mid-October. S&P Global Platts also forecasted a supply climb of 1.6 million barrels for gasoline and a gain of 1.7 million barrels for distillates.
Before the inventory data, the oil market had been dug in for a bullish run. The positive tone this week found another leg of support when President Donald Trump on Tuesday said U.S.-China negotiations were in the “final throes,” while China’s Commerce Ministry said Vice Premier Liu He, the country’s top trade negotiator, spoke with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
Cautious optimism for a trade-pact resolution has underpinned oil prices but some analysts question how long that can persist as a supportive factor, especially heading into the next meeting for the Organization of Petroleum Exporting Countries early next month.
“Crude oil continues to grind higher in the belief that a growth-stabilizing phase one trade deal can be reached. However we view the upside increasingly limited at this stage,” said Ole Hansen, head of commodity strategy with Saxo Bank. “Not least considering the prospects for another contentious OPEC meeting on Dec. 5 and the emergence of several resistance levels.”
Hansen said strong seasonal demand is also a temporary factor holding up prices before Wednesday’s dip. He sees chart congestion on the upside for Brent at the 200-day moving average of $64.50, with any charge higher from there likely contested at the psychologically significant $65 area.
A combination of improved OPEC compliance with existing production curbs, expectations for an extension of output cuts from the group beyond March 2020, and slowing U.S. production growth have all added up to the bullish picture. Those factors are among the big issues that the cartel and its major-producing allies will deal with when it gathers Dec. 5-6 in Vienna. As officials ready to meet, global benchmark Brent trades around 19% higher year to date, after posting a yearly loss of almost 20% in 2018, according to Dow Jones Market Data.
Read: Here are the biggest risks to OPEC+ efforts to balance oil
In other energy trading Tuesday, December gasoline RBZ19, -1.64% was down 1.5% at $1.6792 a gallon, while December heating oil HOZ19, -0.72% fell 0.7% to $1.9465 a gallon.
January natural-gas futures US:NGZ19 closed down 1.2% to $2.501 per million British thermal units, having fallen for three sessions in a row. The market has been in retreat amid a forecast for milder weather for the period after Thanksgiving. For November so far, the contract is down just over 5%.
The EIA also reported, a day early because of the holiday, that domestic supplies of natural gas fell by 28 billion cubic feet for week ending Nov. 22. Analysts expected a fall of 89 billion cubic feet, on average, according to a survey conducted by S&P Global Platts, after a drop of 94 billion cubic feet a week earlier. Total stocks now stand at 3.610 trillion cubic feet, up 548 billion cubic feet from a year ago, but 31 billion cubic feet below the five-year average, the government said.
Read: Why winter weather hasn’t fueled a big rally in natural gas
