BL:Oil drops back below $106, weighed down by rise in US stockpiles
LONDON — Oil eased below $106 a barrel on Wednesday after US crude oil stocks swelled to the highest level in more than two decades and dented the outlook for demand in the world’s top consumer.
Data from industry group the American Petroleum Institute showed a sharp rise of 5.1-million barrels in crude inventories last week, far higher than forecasts of a rise of 1.5-million barrels.
And the Energy Information Administration later on Wednesday could show a rise of 1.4-million barrels, according to a Reuters poll of analysts.
Brent crude futures eased 38c to $105.85 a barrel by 10.45am GMT, while US crude fell 37c to $93.83.
"The actual physical demand, as evident from the wet barrels market, remains subdued," VTB Capital oil and commodities strategist Andrey Kryuchenkov said. "The market will likely take a breather in some consolidation here."
Oil had been supported earlier in the session by China’s import growth and simmering tension in Iran and North Korea.
China’s total imports surged in March, suggesting recovery in the world’s second-largest oil consumer was gathering momentum.
Chinese imports grew 14.1% in March, while exports climbed 10%, relieving concern about the subdued import growth of previous months. Crude imports slipped 2.1% from a year ago, in line with market expectations.
Economic signals
Some analysts said the accelerating restocking process in some industries and a favourable base effect from a year ago may have flattered China’s March imports, which otherwise remain constrained by falling global commodity prices and a slower-than-expected upturn in investment demand.
Export growth in coming months may not be able to match the pace of January and February, even if the recovering global economy continues to bolster demand for goods from Chinese factories, they said.
The annual dip in crude imports did not surprise the market as some state-run refineries started planned overhauls and crude runs at independent refineries also declined on poor margins.
Diplomatic concern about North Korea and Iran also checked losses.
Tension in the Korean peninsula escalated after North Korea moved one long-range missile in readiness for a possible launch and South Korea said it had raised its surveillance.
Iran, which is engaged in a dispute with Western nations over its nuclear programme, said it had begun operations at two uranium mines and a milling plant after weekend talks to resolve the dispute ended in stalemate.
