Oil prices were down slightly on Wednesday, pressured early by data showing big increases in U.S. refined products but recovered some of the losses later by the signing of a Phase 1 trade deal between Washington and Beijing.
Brent futures lost 49 cents, or 0.8 per cent, to settle at $64 a barrel, while U.S. West Texas Intermediate (WTI) crude ended 42 cents, or 0.7 per cent, lower at $57.81.
“The bullish impetus that we had expected off of today’s weekly EIA report failed to develop and as a result, the complex appears headed for lower levels than we had anticipated despite the late session recovery,” Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates, said in a note.
Under the Phase 1 trade agreement, China will buy $18.5 billion more in U.S. energy products in the first year and $33.9 billion in the second.
However, commodity traders and analysts remained cautious - struggling to map out how China will reach the eye-popping amounts it is committing to buy from the United States.
Trump said he would remove all U.S. tariffs on Chinese imports as soon as the two countries completed Phase 2 of their trade agreement, adding he does not expect there to be a Phase 3 pact.
Phil Flynn, an analyst at Price Futures Group in Chicago, said prices pared early losses on “optimism surrounding the U.S.-China trade deal and expectations that oil demand is going to continue to be solid.”
Earlier, oil prices fell to their lowest in over a month after the U.S. government reported big increases in gasoline and distillates inventories and a record crude output.
U.S. gasoline stockpiles last week rose to their highest since February, while distillate inventories jumped to their most since September 2017, according to the U.S. Energy Information Administration (EIA).
“I think they were able to look past the build in gasoline and distillates, realizing that it will probably work itself out in the next couple of weeks,” Flynn said.
The EIA report also showed crude production for the week ended Jan. 10 rose to 13 million barrels per day (bpd) and a much-bigger-than-expected draw in crude inventories.
Both oil benchmarks were also hit by a report from the Organization of the Petroleum Exporting Countries that said the producer group expected lower demand for its oil in 2020 even as global demand rises, as rival producers grab market share. Output in the United States was expected to touch another record in 2020.
“The continued accommodative monetary policies, coupled with an improvement in financial markets, could provide further support to ongoing increases in non-OPEC supply,” OPEC said.
OPEC and some non-OPEC allies such as Russia have been curbing production to prevent an oil glut and support oil prices above $60 per barrel. Their current deal expires in March.