Brent oil prices slipped to a three-month low on Wednesday on expectations that the combination of slowing demand and rising production would cause global stocks to build. Hence, analysts forecast U.S. stocks data due later Wednesday could provide an early indication of this.
Brent crude, the global oil benchmark, was down 0.9 percent to $71.51 a barrel on London’s ICE Futures exchange while on the New York Mercantile Exchange West Texas Intermediate (WTI) futures were trading down 0.8 percent at $67.55 a barrel.
Oil markets have been depressed over the last week as Saudi Arabia and other members of the Organisation of Petroleum Exporting Countries (OPEC) and Russia increased production and as some supply disruptions eased.
David Reid, lead crude market analyst at consultancy JBC Energy said: “The correction in the oil price represents something of a convergence between fundamentals and physical realities. We expect a fairly rapid lengthening in the global oil supply balance”.
The U.S. oil market has been tight this year but data on Tuesday from the American Petroleum Institute showed an unexpected rise of over 600,000 barrels in crude inventories.
Analysts had forecast a decline of 3.6 million barrels in U.S. crude stocks for the week through July 13.
“Oil is trading lower this morning on the back of the API release, and price action later today [Wednesday] will largely depend on what the EIA release,” said ING commodities strategist Warren Patterson.
“A number broadly similar to the API could put some further pressure on the market later this afternoon [US time Wednesday],” he added.
Investors have also begun to worry about the impact on economic growth and energy demand of the trade dispute between the United States and its trading partners, including China.
Esther George, Kansas City Federal Reserve Bank President had on Tuesday said uncertainty over U.S. trade policy could slow the economy, even if recently imposed tariffs are too small to have a big impact.
Trade policy was a significant downside risk to the outlook for economic growth, George said.