One expert blames China for prices not rising more dramatically: File Image/Pixabay
Even though the numbers are ephemeral, an unexpected build in U.S. crude stockpiles caused traders on Wednesday to once more to envision that the world is swimming in oil with not enough demand to consume it.
As a result, West Texas Intermediate settled $1.71 lower at $61.39 per barrel, the lowest closing level in more than a week, while Brent fell $1.19 at $70.99 per barrel.
The cause of the losses were U.S. crude inventories swelling by 4.7 million barrels in the latest week to their highest level since July 2017, according to the Energy Information Administration; this was in stark contrast to analysts polled by Reuters forecasting a decrease of 599,000 barrels.
Jason Schenker, president, Prestige Economics
It's not clear to the markets if China's [economy] is growing or not
Gasoline also posted a surprise build, rising by 3.7 million barrels compared with expectations for an 816,000 barrel drop.
This, combined with frustration over no end in sight of the U.S./China trade war (which could eventually impact demand for oil), compelled experts such as Bob Yawger, director of futures at Mizuho, to note that "It's about as bad as it could have been considering the fact that driving season is so close."
Meanwhile, Stephen Brennock, oil analyst at PVC Oil Associates, warned that any fresh development between the U.S. and Iran or the U.S. and China has the "potential to send prices $10 a barrel in either direction" - although disturbing news earlier this week of Iran increasing its uranium enrichment was ignored by the crude trading community.
For his part, Jason Schenker, president of Prestige Economics, told Bloomberg radio that by far the most important of all the geopolitical issues facing crude "is the trade piece....and the slowing growth in China," simply because China is the biggest net importer in the world of crude.
When asked why crude prices haven't risen higher despite all the global tensions, Schenker again referred to China: "It's not clear to the markets if China's [economy] is growing or not, and commodities like oil are bought, not sold - and the demand side can pull the price a lot faster than the supply side."
He added that the only reason prices rose earlier this year is because the Organization of the Petroleum Exporting Countries (OPEC) "really kept their hand firmly on the rudder...to keep supply in check."