Investing.com - Worries over the end of post-summer U.S. crude inventory draws and Saudi Arabia’s lightning recovery from the attack on its oil facilities are eating further into the risk premium left in oil after last week’s market upheaval.
Crude prices settled more than 1% lower after the U.S. government reported a large surprise build in weekly crude stocks. Adding to the market’s weight was a Reuters report that said Saudi Arabia had restored faster-than-expected production lost from the Sept. 14 attack on its Abqaiq crude processing plant and Khurais oil field.
Crude prices started the session lower on Congress’s decision on Tuesday to start the impeachment process against President Donald Trump following reports he asked Ukraine to investigate political rival and former Vice President Joe Biden.
U.S. West Texas Intermediate crude settled down 80 cents, or 1.4%, at $56.49 per barrel.
U.K. Brent oil settled down 71 cents, or 1.1%, at $62.39.
The two crude benchmarks fell more than 2% earlier, but came off their lows after Trump said a trade deal with China could happen sooner than expected.
U.S. oil stockpiles rose by 2.4 million barrels last week, the Energy Information Administration reported, against market expectations for a draw of 250,000 barrels. It was the second-straight weekly crude build cited by the EIA after four-straight weeks of unseasonably heavy crude draws late into the summer that took 24 million barrels off stocks.
“This could be the clearest signal that the post-summer crude draws are over and that we could see substantial builds here on, which is hardly ideal for oil bulls as the risk impact from the Saudi attack is slowly fizzling,” Investing.com analyst Barani Krishnan said.
The EIA also said that gasoline inventories rose by 519,000 barrels, compared with a consensus for a rise of 296,000 barrels. The only bright spot for oil bulls was a near 3-million-barrel draw in distillate stocks versus analysts’ projections for a slide of 733,000 barrels.
Reuters, quoting three sources, reported that Saudi Arabia had restored its oil production capacity to 11.3 million barrels per day, faster than thought.
With Wednesday’s slide, crude prices were just about $2 higher since the attack on Saudi Arabia.
“In less than two weeks, we have given back all that huge geopolitical premium we saw from the Saudi crisis”, Krishnan said. Gains of as high as $8 per barrel were seen right after the attack.