London: Oil slipped below $65 a barrel on Wednesday after data showing an unexpected rise in U.S. crude stocks suggested demand in the world’s top energy consumer was still weak.
The market is awaiting US Energy Information Administration (EIA) data later on Wednesday to see if they will confirm the American Petroleum Institute’s (API) figures.
“The API numbers will likely exert pressure on the crude complex over the course of the Wednesday session, as they imply that the EIA numbers will likely follow suit,” said MF Global in its daily note to clients.
US crude oil for September delivery was down 83 cents at $64.78 a barrel by 0750 GMT, off a low of $64.75. London Brent crude for September fell 44 cents to $66.43.
US crude oil stockpiles rose unexpectedly last week as domestic refining activity slumped, the API said on Tuesday.
Commercial oil inventories jumped 3.1 million barrels to 349.883 million barrels, reversing a stretch of weekly declines triggered by thin import levels and defying analyst expectations for a 2.1 million barrel drop.
A Reuters survey of 15 analysts forecast the EIA would report a drop in crude oil inventories as slow imports countered a decline in refining activity.
But refined products supplies were expected to have risen, despite the lower domestic refinery capacity use.
Global oil inventories are at historically high levels, equivalent to around 62 days of forward demand by the industrialised countries of the Organisation for Economic Cooperation and Development (OECD).
“Energy demand remains weak,” MF Global said. “We would also conclude that the recent price rises we are seeing in energy are more attributable to exogenous variables as opposed to any noticeable improvement in the complex’s basic fundamentals.”
Data showing apparent oil demand in the world’s second-largest energy user rose for the third month in a row could help limit oil’s losses.
China’s implied oil demand in June rose 1.8% over a year ago, Reuters calculations from official data showed on Wednesday.
Asian equities markets also supported sentiment.
Asian shares climbed to a 10-month peak on Wednesday, but gains were limited as investors locked in profits in the belief that the run-up had become overstretched.
On the supply front, Royal Dutch Shell said on Tuesday it had resumed oil output at its EA oilfield in Nigeria, a rare bright spot for an industry reeling from a string of militant attacks in the last two months.
Militants have devastated the Opec member’s oil output and kept Nigeria from pumping above two-thirds of its installed capacity, costing it billions of dollars in lost revenue.