Investing.com – A big build in weekly U.S. crude stocks has neutered the oil rally while the market waits out the trade deal that hasn’t shown.
Prices of West Texas Intermediate, the benchmark for New York-traded crude, and London’s Brent, the global gauge for oil, fell for the first time since Thursday after the U.S. Energy Information Administration (IEA) reported a crude build five times more than expected for the week ended Nov. 1.
West Texas Intermediate settled down 88 cents, or 1.5%, at $56.35 per barrel. It gained a cumulative 5.6% in the last three sessions.
London’s Brent crude fell $1.22, or 2%, to $61.74. It rose 4.5% over the past three days.
The Thursday-to-Tuesday rally in oil was powered by expectations that China and the U.S. were on the cusp of concluding phase one of their trade deal that would roll back much of the tit-for-tat tariffs. On Wednesday, there was still no indication that negotiators were ready to move Presidents Donald Trump and Xi Jinping from talking phase one to the signing of the agreement.
Reuters, meanwhile, quoted a senior official of the Trump administration as saying the interim trade deal could be delayed even until December, as discussions continued over terms and venue.
The EIA, with its weekly supply-demand report, sent oil prices lower by reporting that crude stockpiles rose by 7.9 million barrels last week, compared with expectations from analysts for an increase of about 1.5 million barrels.
Gasoline stockpiles fell by 2.8 million barrels, versus an expectation for a draw of 1.8 million barrels, the EIA said.
Distillates inventories fell 622,000 barrels, compared with forecasts for a drop of about 950,000.
“What we had today was a big surprise from the EIA,” said Tariq Zahir, managing member at the oil-focused Tyche Capital Advisors in New York. “While gasoline has a slightly bigger-than-expected draw, crude saw a massive build.”
“Now, we can expect several negative factors to come into play in the weeks to come,” Zahir added. “The risk we feel especially with the recent crude oil inventory builds and reduction in demand forecasts will be to the downside for prices in the energy markets.”
Among these, he said, was the possibility of OPEC settling on its status quo of production cuts of 1.2 million barrels per day at its December meeting, instead of pushing for deeper reductions.
“If the trade deal doesn’t get done soon enough, oil could see volatility too as there are tariffs on China that are due next in December,” Zahir said.