Oil Slips on Surprise Rise in U.S. Inventories, OPEC+ Meeting Awaited

© Reuters

By Ambar Warrick

AiVIF.com-- Oil futures dropped in early trade on Wednesday after data pointed to an unexpected rise in U.S. crude stockpiles, while traders awaited an OPEC+ meeting for more clarity on crude production this year.

As of 2006 ET (1206 GMT), West Texas Intermediate Futures traded down 0.5% at $93.91 a barrel, while Brent Oil Futures fell 0.3% to $99.50. Crude prices saw a volatile session on Tuesday amid concerns over rising U.S.-China tensions after House of Representatives Speaker Nancy Pelosi's Taiwan trip drew ire from the Chinese government. 

Data from the American Petroleum Institute (API) showed U.S. oil inventories rose by about 2.2 million barrels in the week to July 29, up from a fall of about 4 million barrels in the previous week. Economists had expected inventories to drop by 0.4 million. 

The API figures are likely to herald a similar upside in official government inventory figures, due later on Wednesday.

The rise in inventories also comes just before a meeting of the Organization of Petroleum Exporting Countries and its allies (OPEC+), set to begin later in the day.  

While U.S. President Joe Biden has been repeatedly calling upon Saudi Arabia- which leads the group- to raise production, market consensus is that most members will be hesitant to hike supply during an economic downturn.

The OPEC+ bought production back up to pre-pandemic levels this year, as supply disruptions caused by the Russia-Ukraine war saw crude prices shoot up to nearly $140 a barrel.

But weak manufacturing data from industrial powerhouse China suggests that crude demand may be languid for the remainder of the year. Mixed readings from the United States and the Eurozone also pointed to a slowdown in growth, which severely dented oil prices at the start of the week. 

Strength in the dollar has also weighed on oil prices in recent months, as investors expect the Federal Reserve to continue hiking rates to combat rampant inflation.

The dollar jumped over 1% on Tuesday as fears of an escalation in U.S.-China tensions drove safe haven demand for the greenback.