Oil falls 1 percent as supply concerns fade

A day after the American Petroleum Institute disappointed oil bulls by reporting an estimated inventory build across the board, the Energy Information Administration deepened the mood by saying US crude oil inventories added 1.3 million barrels in the week to February 1. Concern about potentially slowing demand for crude oil has contributed to price reductions.

Futures on U.S. and global benchmarks, West Texas Intermediate (WTI) and Brent crude, rose to the highest level since late November 2018.

Weighing on oil markets, US government data showed new orders for USA -made goods unexpectedly fell in November, with sharp declines in demand for machinery and electrical equipment.

However, U.S. crude stocks rose last week even as refineries boosted output, while gasoline and distillate stocks increased, data from industry group the American Petroleum Institute showed on Tuesday.

The report revealed that there have been encouraging signs in trade talks between the United States and China over tariffs recently, and any agreement between the two countries could provide upside to oil demand, and indeed oil prices, going forward.

Crude futures earlier posted around two-month highs.

WTI prices were $46.54 per barrel at the start of the year, rising to current levels in part on geopolitical concerns about Venezuela, as well as on the possibility of an economic slowdown in China.

Supply cuts by the Organization of the Petroleum Exporting Countries and its allies, including Russian Federation, have been supporting prices.

The producers' alliance, known as OPEC+, began cutting production from last month to avert a new supply glut.

USA sanctions against Venezuela's oil industry are expected to freeze sales proceeds of Venezuelan crude exports to the United States.

The European Union is considering imposing more sanctions on the government of Venezuelan President Nicolas Maduro but has not discussed an oil embargo, Malta's foreign minister said on Monday.

Market participants are also watching for developments surrounding the U.S.

Global economic worries have weighed on market sentiment in recent days, offsetting support from signs that global supplies are tightening.

According to latest OPEC forecasts, global oil demand will grow by 1.29mn bpd in 2019, the lowest rate of growth since 2013.

US President Donald Trump last week said he would meet with Chinese President Xi Jinping, perhaps twice, in the coming weeks to try to seal a comprehensive trade deal with Beijing, but acknowledged it was not yet clear whether a deal could be reached.

  • Eleanor Harrison