Oil falls to nearly 6-month lows after surprise U.S. crude, gasoline build

Sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

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  • U.S. crude and gasoline inventories rise unexpectedly – EIA
  • OPEC+ decides on a small increase of 100,000 bpd in production target
  • The United States had been pushing for a more significant increase in supply
  • Iranian and US negotiators travel to Vienna for talks

HOUSTON, Aug 3 (Reuters) – Oil prices fell around 4% on Wednesday to near six-month lows, after U.S. data showed crude and gasoline inventories rose sharply. unexpected last week and that OPEC+ announced that it would increase its oil production target by 100,000 barrels per day (bpd).

Brent crude futures settled down $3.76, or 3.7%, at $96.78 a barrel. It was his lowest settlement since Feb. 21.

West Texas Intermediate (WTI) crude futures fell $3.76, or 4%, to $90.66, the lowest settlement since Feb. 10. The contract hit a session low of $90.38 a barrel, the lowest since Feb. 25.

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Both contracts flipped during the session.

The first-month Brent futures premium to six-month barrel loading is at its lowest level in three months, indicating diminished supply concerns. The same premium for WTI futures approached a four-month low.

U.S. crude oil inventories rose unexpectedly last week as exports fell and refiners cut cycles, while gasoline inventories also posted a surprise rise as demand slowed , said the Energy Information Administration.

Crude inventories rose 4.5 million barrels last week, as analysts forecast a drawdown of 600,000 barrels. Gasoline inventories rose 200,000 barrels, compared to expectations of a decline of 1.6 million barrels.

“The Crude Oil number is well above expectations. Gasoline is a disappointment. You should never see a buildup of gasoline over the summer. This is a very bearish report,” said Bob Yawger, director of energy futures at Mizuho.

Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, agreed to a slight increase in the group’s production target to around 0 .1% of global oil demand. Read more

While the United States has asked the group to increase production, spare capacity is limited and Saudi Arabia may be reluctant to increase production at the expense of Russia, hit by sanctions linked to the Ukrainian conflict.

The Biden administration is focused on keeping oil prices low, the White House has said.

Ahead of the meeting, OPEC+ cut its forecast for an oil market surplus this year from 200,000 bpd to 800,000 bpd, three delegates told Reuters. Read more

Also weighing in on the prices, Iranian and US officials said they were traveling to Vienna to resume indirect talks on Iran’s nuclear program, rekindling near-vanished hopes of a lifting of sanctions hampering Iranian oil exports. Read more

On the demand side, Federal Reserve officials on Wednesday again expressed determination to contain high inflation, although one said a half-percentage-point hike in the the U.S. central bank’s key rate next month could be enough to move toward that goal. Read more

The U.S. dollar index, which tracks the greenback against six major peers, also rose, putting pressure on demand by making oil more expensive for holders of other currencies.

However, oil prices were helped by the Caspian Pipeline Consortium (CPC), which connects Kazakh oilfields to Russia’s Black Sea port of Novorossiysk, saying supplies were down significantly, without providing figures. Read more

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Additional reporting by Laila Kearney and Stephanie Kelly in New York, Shadia Nasralla in London, Sonali Paul and Emily Chow; Editing by Marguerita Choy, David Goodman and David Gregorio

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