Oil dips after unexpected build in US crude stockpiles

NEW YORK: Oil prices slipped on Thursday after industry data showed a surprise increase in US crude inventories that revived pandemic-related fuel demand concerns, while US stimulus hopes buoyed prices.

Brent crude futures fell 3 cents to $56.05 a barrel by 11:27 am EST (1627 GMT). US West Texas Intermediate (WTI) crude futures fell 14 cents to $53.17 a barrel.

Both benchmarks rose over the past two days on expectations of massive Covid-19 relief spending under new US President Joe Biden.

Late Wednesday, industry data showed US crude oil inventories rose 2.6 million barrels last week, compared with analysts’ forecasts in a Reuters poll for a 1.2 million-barrel draw.

Official inventory data has been delayed by two days to Friday due to the Martin Luther King Jr holiday and Inauguration Day.

“We are on pause until we get the inventory report,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “The market is waiting to see what we’re going to see in inventories tomorrow and stimulus down the road.”

Elsewhere, compliance with a deal to cut output from the Organization of the Petroleum Exporting Countries and its allies fell in December from November. Compliance reached 99pc last month, two sources told Reuters.

Meanwhile, rising coronavirus cases in China, the world’s largest crude oil importer, weighed on prices.

Beijing plans to impose strict virus testing requirements during the Lunar New Year holiday season, when tens of millions of people are expected to travel, as it battles the worst wave of new infections since March 2020.

The commercial hub of Shanghai reported its first locally transmitted cases in two months on Thursday. Longer term, the Biden administration could be bearish for oil.

Among his first actions as president, Joe Biden announced America’s return to the Paris climate accord to combat climate change and revoked a permit for the Keystone XL oil pipeline project from Canada.

The administration is also committed to ending new oil and gas leasing on federal lands.

The markets will also follow expected US efforts to strengthen nuclear constraints on oil producer Iran through diplomacy. It will raise the issue in early talks with foreign counterparts and allies, the White House said.

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