Brent Falls 2% in a Week

Oil prices fell on Wednesday after a surprise rise in US inventories of refined products in what the market interpreted as a sign of flagging demand.

Brent crude futures were down 48 cents at $62.38 a barrel, down 2% since last Wednesday, while US crude futures were off 46 cents at $57.16 a barrel, CNBC reported.

With global equities under pressure from sliding technology stocks and the US bond market suggesting investors are cautious about the outlook for economic growth, industrial commodities such as crude oil and copper are feeling the pinch this week. Supply cuts by the Organization of Petroleum Exporting Countries, Russia and other producers that were extended last week to all of next year have helped lift Brent prices by more than 40% since June.

“The turn-down in risk sentiment is a nice justification for why you might want to pare down some of the long positions taken going into the OPEC meeting,” London Capital Group’s head of research, Jasper Lawler, said.

“In the supply and demand picture for oil, there hasn’t been much change ... There is a general theme of selling back things that have recently been outperforming, tech being the obvious one ... so if you are looking across the asset spectrum and looking to sell things that have done well, then oil fits into that category.”

Traders said prices fell after an American Petroleum Institute report on Tuesday showed a 9.2-million-barrel rise in gasoline stocks in the week ended Dec. 1 and an increase of 4.3 million barrels in distillate inventories, which include motor diesel and heating oil. The perception that the higher fuel stocks pointed to weak demand outweighed a drop in crude inventories by 5.5 million barrels to 451.8 million barrels, traders said.

One factor that could undermine OPEC’s and Russia’s effort to cut supplies and prop up prices is US oil production, which has risen by 15% since mid-2016 to 9.68 million barrels per day, close to levels of top producers Russia and Saudi Arabia.

"But a weaker economic performance and a decline in refinery capacity utilization in the first quarter could be a drag on oil demand and dampen prices," said Georgi Slavov, the head of research at commodity broker Marex Spectron.

“Demand remains firm, which is the main reason for us to still see oil at/above $60 per barrel. This is likely to change as we approach 2018,” Slavov said in a note.