Oil Retreats as U.S. Stockpile Jump Counters Global Supply Fears

Oil retreated amid signs of a sharp increase in U.S. crude inventories and concerns over the strength of economic growth in China.

Futures in New York fell as much as 1.3 percent after rising 0.7 percent Tuesday. The American Petroleum Institute was said to report U.S. stockpiles jumped 6.81 million barrels last week, much more than government data due Wednesday is forecast to show. A gauge of manufacturing in top crude importer China fell in April, highlighting the toll a trade war between Beijing and Washington is taking on the world’s No. 2 economy.

Prices also slid as an attempted uprising against President Nicolas Maduro in OPEC member Venezuela appeared to fizzle. While U.S. President Donald Trump stepped up pressure on the regime with backing for opposition leader Juan Guaido, Tuesday’s clashes in Caracas failed to produce any definitive outcome.

West Texas Intermediate futures for June delivery declined 46 cents to $63.45 a barrel on the New York Mercantile Exchange as of 10:40 a.m. London time. Prices closed 41 cents higher at $63.91 on Tuesday. Prices in April were the calmest since August.

Brent for July settlement was trading 25 cents lower, or 0.4 percent, at $71.81 a barrel on the London-based ICE Futures Europe exchange. The June contract expired on Tuesday after rising 1.1 percent to $72.80. The global benchmark crude was at a premium of $8.29 to WTI for the same month.

Oil hit a six-month high last week as the White House announced it would tighten sanctions on crude shipments from Iran, ending the waivers that currently allow several countries to keep buying Iranian oil. Prices have since retreated even as Saudi Arabia, the leader of the Organization of Petroleum Exporting Countries, signaled it won’t rush to compensate for lost Iranian barrels, and as political tensions escalate in Venezuela.

“Amid this host of bullish catalysts is one deepening pocket of weakness — U.S. oil stocks are swelling due to an upswing in crude inventories,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. “Glum alarm bells are ringing louder in the U.S.”

The U.S. Energy Information Administration is predicted to report that nationwide crude stockpiles rose by 1.75 million barrels last week, according to a Bloomberg survey. Inventories jumped 5.5 million barrels in the prior week, and are at the highest level since October 2017, EIA data show. American crude production, meanwhile, is at record levels.

On the demand front, weaker Chinese manufacturing activity signals the fragility of the economic stabilization seen in the first quarter. In a shift from the mostly optimistic messaging so far, the U.S. said that it’s prepared to walk away from trade talks as negotiators landed in Beijing. Industrial production has also tumbled in other major oil buyers South Korea and Japan, and GDP growth slowed a notch in Taiwan.

Other oil-market news The oil market will remain tight in 2019 amid supply disruptions, BP Plc CEO Bob Dudley said in an interview with Bloomberg Television at the Milken Institute Global Conference 2019. Restoring normal oil flows through Russia’s largest export pipeline could take several months after the crucial conduit was contaminated with chemicals last week. Oil refiners in the U.S. are using more light crude to fill the gap from the sludgy, sulfurous stuff they used to get from OPEC. Crude shipments from the group to American ports dipped to a 33-year low in February.  Abu Dhabi National Oil Co. is inviting bids to explore for oil and gas in two onshore and three offshore blocks, the company said.