Oil prices fell on Thursday after industry data showed a larger-than-expected build-up in the U.S. inventories, but losses were limited after China said it hoped to reach a phased trade agreement with the United States as early as possible.
Global benchmark Brent crude oil was down by 39 cents at $59.03 a barrel by 0837 GMT. U.S. WTI crude oil was down 43 cents at $52.93.
U.S. crude inventories soared by 10.5 million barrels to 432.5 million barrels in the week to Oct. 11, the American Petroleum Institute’s weekly report showed ahead of official government stocks data due on Thursday.
Analysts had estimated U.S. crude inventories rose by around 2.8 million barrels last week.
“An enormous U.S. inventory build hits at precisely the wrong moment when the markets are overly focused on demand devastation due to the latest run of weaker global economic data,” Stephen Innes, Asia Pacific market strategist at AxiTrader, said in a note on Thursday.
If confirmed by the government data, the build-up would be the biggest U.S. inventory increase since February, 2017, Innes said.
It comes amid concerns about the global economy - and therefore oil demand - as data from the United States showed retail sales fell for the first time in seven months in September. That followed earlier data showing a moderation in job growth and services sector activity.
Still, hopes of a potential U.S.-China trade deal helped offset oil price losses. China’s commerce ministry said on Thursday that China hoped to reach a phased agreement with Washington as early as possible, and make progress on cancelling tariffs on each others’ goods.
“Overall, we are seeing a more constructive picture both in terms of the demand side of the equation with the partial agreement from the U.S. (and) also from a technical point of view. (Prices) are at close to the bottom end of trading range rather than the top,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney.
Optimism over an imminent deal on Brexit, Britain’s exit from the European Union, also provided some support, but investors remained tense after Northern Ireland’s Democratic Unionist Party said it could not support the proposed agreement.
“Brexit headlines continue to provide mixed signals despite a deal looking more likely when compared to a week ago,” said Hussein Sayed, market strategist at FXTM.
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