By Ambar Warrick
Investing.com– Oil prices fell on Wednesday after data showed U.S. crude oil inventories rose more than expected last week, although signs of robust gasoline demand and a warning about a tightening of supplies from Saudi Arabia helped limit the losses.
Data from the American Petroleum Institute (API) Tuesday showed U.S. crude inventories rose 4.5 million barrels in the week to Oct. 21, more than expectations for a 200,000-barrel increase.
While the reading likely reflects drawdowns from the Strategic Petroleum Reserve (SPR), it also signals a short-term excess in oil supply, which is negative for prices.
The reading precedes a Official report this should show that US crude inventories rose by 1 million barrels last week.
London-traded Brent oil futures fell 0.7% to $91.09 a barrel, while West Texas Intermediate crude futures fell 0.5% to $84.86 barrel at 10:09 p.m. ET (02:09 GMT). Both contracts rose slightly on Tuesday.
Crude markets marked a weak start to the week after a series of slower-than-expected manufacturing readings raised concerns about worsening demand for crude. Data from China, the world’s largest crude importer, also showed that oil shipments to the country have slowed significantly this year.
Oil prices fell sharply from yearly highs as fears of a slowdown in demand and an increase in US supply weighed on markets. But prices have rebounded in recent weeks after a supply cut by the Organization of the Petroleum Exporting and Allied Countries (OPEC+).
Tuesday’s API data also showed that gasoline inventories fell sharply last week, indicating that demand for fuel in the United States remains stable. Recent data from the United States Energy Information Administration showed that U.S. Gasoline Stocks hit its lowest level in eight years in mid-October.
Further supporting crude prices, Saudi Energy Minister Abdulaziz bin Salman warned that Washington’s release of SPR supplies would cause more pain in the coming months. The Biden administration began drawing heavily on the SPR this year to counter a spike in oil prices, and threatened to release more in response to the OPEC+ supply cut.
The SPR is currently at its lowest level since 1984, which has drawn criticism from Biden’s political rivals. While the US government has recently outlined plans to replenish the SPR, it will only do so when oil prices are significantly below current levels.
Such a scenario may be unlikely in the short term, given that OPEC+ has threatened further supply cuts to keep prices high. Oil supplies could also tighten further due to new restrictions against Russia.