Conflicting Reports Of Demand Pause Oil's Upward Trajectory

Meanwhile, ConocoPhillips expands its U.S. reach in a $17 billion acquisition deal: File Image/Pixabay.

Oil's tentative upward trajectory this week was interrupted on Wednesday when traders took notice of data showing a rise in crude storage in the U.S. prior to the start of the summer driving season; prices fell about 1 percent as a result.

Analysts calculated that U.S. energy firms added 1 million barrels of gasoline into storage during the week ended May 24, compared with an average annual decrease of 200,000 barrels over the past five years.

Ritterbusch and Associates stated, "Gasoline demand (is) still surprisingly weak in keeping supplies near normal levels as bullish seasonals diminish."

Adding to concerns was consumer confidence in that country improving in May, albeit with many households still expecting higher interests rates over the next year.

Concerns were stoked yet further when Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said the central bank's policy stance is restrictive, but additional interest rate hikes haven't been ruled out.

Not to be outdone, Bloomberg posited that the Organization of the Petroleum Exporting Countries (OPEC) "faces a darkening demand outlook in China as flagging factory strength and a housing crash reduce consumption of plastics and fuels used in construction."

This led to Brent on Wednesday settling down 62 cents at $83.60 per barrel, and West Texas Intermediate settling down 60 cents to $79.23 per barrel.

However, challenging the grim sentiments were reports late in Wednesday's session from the American Petroleum Institute that domestic crude oil inventories fell by a massive 6.4 million barrels for the week ending May 17, compared to a 2.48 million barrel hike the week prior.

Gasoline inventories fell as well, by 452,000 barrels, after the previous week's 2 million barrel increase.

In other oil news on Wednesday, ConocoPhillips agreed to buy Marathon Oil in a stock transaction worth $17 billion; the deal will increase the former's reach in Texas, New Mexico and North Dakota and will add 2 billion barrels to its inventory.