Oil prices edged lower on Thursday, extending losses from the previous session as signals of higher supply from the United States met concern over lacklustre energy demand from China.
Brent futures were down 70 cents at $80.48 a barrel by 1250 GMT. U.S. West Texas Intermediate crude (WTI) shed 65 cents to $76.01. Both benchmarks fell more than 1.5% in the previous session.
WTI’s front-month contract also traded below the price for the second month, a structure known as contango, suggesting that investors expect prices to increase. The front month’s discount to the second month traded at minus 17 cents on Thursday.
Worries have been amplified by the U.S. crude stocks that the U.S. Energy Information Administration (EIA) said rose by 3.6 million barrels last week to 421.9 million barrels, far exceeding analysts’ expectations in a Reuters poll.
Varga said the fall in crude prices flies in the face of recent estimates of global demand-supply fundamentals from OPEC and the International Energy Agency (IEA), both of which predicted supply tightness in the fourth quarter.
Meanwhile, October inflation data from major economic hubs including the euro zone, the United States and the UK have also been encouraging, he added.
“The current price drop is taking place amid a seemingly auspicious backdrop, which suggests that investors simply do not buy into the ‘Q4 stock draw’ narrative; something that is not backed up by the recent weekly EIA reports either,” said Varga.
One of the factors likely to be spooking investors is an expected slowdown in Chinese oil refinery throughput. Runs eased in October from the previous month’s highs as industrial fuel demand weakened and refining margins narrowed.