(Bloomberg) -- Oil traded near a six-week low as industry data showing an increase in U.S. crude stockpiles re-affirmed expectations that global markets will be oversupplied in the first part of the year.
Futures slipped as much as 0.7% in New York to near $58 a barrel as traders focused on the approaching seasonal lull in demand once winter ends, and amid signs of plentiful supply around the world. The American Petroleum Institute reported inventories expanded by 1.1 million barrels last week, according to people familiar with the data.
West Texas Intermediate crude for February delivery fell 16 cents, or 0.3%, to $58.07 a barrel on the New York Mercantile Exchange as of 10:14 a.m. in London. The contract closed Monday at the lowest since Dec. 3. Concerns that the U.S. and Iran were headed for conflict over the killing of an Iranian general, which sent prices soaring earlier this month, have largely dissipated.
Front-month WTI Futures were at a discount, or contango, to second-month for a second day, a relationship normally suggesting oversupply.
Brent futures for March settlement dropped 15 cents to $64.34 a barrel on the ICE (NYSE:ICE) Futures Europe exchange after climbing 0.5% on Tuesday. The global benchmark crude traded at a $6.22 premium to WTI for the same month.
“The preliminary API data is likely weighing on sentiment this morning,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas (PA:BNPP) SA.
The U.S. government’s Energy Information Administration will release official data on stockpiles later today. Analysts surveyed by Bloomberg forecast that the EIA will report that inventories rose by 1.1 million barrels in the week ended Jan. 10, in line with the API’s numbers. It would be the second straight increase following three weeks of declines.
There were mixed sentiments about the trade pact that President Donald Trump is poised to sign with China, which in theory defuses tensions that weighed on markets throughout last year, but isn’t wholly assuaging concerns. Existing U.S. tariffs on Chinese goods are likely to stay in place until after the presidential election, people familiar said, while Reuters reported the U.S. is drafting more rules to block sales to Huawei Technologies Co.
“While the stay in existing tariffs may be disappointing, further details from the agreement tonight might change the mood in the market,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “Additional positive details, especially pertaining to phase-two negotiations, might yet give crude prices a lift.”