Oil prices fell on Wednesday after the US Energy Information Administration reported a surprise increase in US crude stocks which fed concerns about a global oversupply of oil at a time when trade tensions are heightened, hinting at a drop in energy demand.  Anadarko photo.

Brent oil prices down over 2 per cent

Oil prices fell on Wednesday after the US Energy Information Administration reported US crude inventories had risen, feeding concerns about a global oversupply at a time when investors are weighing the impact of growing trade tensions.

Brent crude futures settled the day at $72.39/barrel, down $1.82 and US West Texas Intermediate fell $1.10, settling at $67.66/barrel.  The Canadian Crude Index dropped $1.07 to $39.40.

In its weekly data release, the US EIA reported that US crude stocks rose by 3.8 million barrels last week due to rising imports.  Analysts polled prior to the release of the report had expected a decline in US oil inventories of 2.8 million barrels.

Oil price losses were curtailed, however, as the report also showed rising US demand.

“It was surprising to see the build in crude, but it was a little bit offset by the bigger-than-expected draw in gasoline and the draw in Cushing,” Tariq Zahir, managing member at Tyche Capital Advisors told Reuters.

Gasoline stocks fell by 2.5 million barrels and crude stocks at Cushing, Oklahoma, dropped by 1.3 million barrels, according to the EIA data.

The EIA also reported that US crude output fell by 30,000 barrels per day (b/d) to 10.44 million b/d in May.

Also pressuring oil prices is rising global trade tensions after the Trump administration threatened to slap a 25 per cent tariff on $200 billion worth of goods from China.  Beijing says it will retaliate should the US take such measures to hinder trade.

In July, Brent dropped over 6 per cent and US WTI was down about 7 per cent.  The two benchmarks suffered the biggest monthly declines since July 2016.

Russia’s Energy Minister Alexander Novak said on Wednesday that Russian crude production was on average higher than the amount Moscow had pledged after the members of the OPEC supply cut pact met in June.

Novak said Russia increased its production to help maintain the crude market’s stability.

Kuwait also boosted its production last month by 100,000 b/d over June’s average.

According to a Reuters survey, OPEC production reached a 2018 high in July after OPEC, Russia and other pact allies agreed to ease supply cuts to compensate for falling production in Venezuela and US sanctions against Iranian crude exports.

“Brent futures continue to be pressured by last month’s sharp upswing in Saudi and Russian crude exports that have forced a temporary supply glut that will require some slowing in output gains this month, especially from the Saudis,” Reuters reports Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.