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Oil Lower as Inventories Stir Doubts Over Recovery in Demand

Oil futures lost ground Thursday after data from a U.S. industry trade group showed a rise in crude inventories, raising questions over whether expectations for a sharp recovery in demand were overdone.

West Texas Intermediate crude for July delivery fell 28 cents, or 0.9%, to $32.53 a barrel on the New York Mercantile Exchange, while August Brent crude was off 20 cents, or 0.6%, at $36.25 a barrel on ICE Europe.

The American Petroleum Institute reported late Wednesday that U.S. crude supplies rose by 8.7 million barrels for the week ended May 22, according to people familiar with the report. The API data also showed gasoline stockpiles edged up by 1.1 million barrels, while distillate inventories climbed by 6.9 million barrels. However, crude stocks at the Cushing, Oklahoma, delivery hub fell by 3.4 million barrels for the week, sources said.

“We have often claimed recently that the oil market is pricing in the positive developments and forthcoming rebalancing of supply and demand too quickly,” said Eugen Weinberg, analyst at Commerzbank, in a note. “Reports of fairly weak demand in the U.S. over the long weekend, and indeed yesterday’s API figures, point rather to weaker demand dynamism than anticipated.”

More closely followed Inventory data from the Energy Information Administration will be released Thursday. The EIA data are expected to show crude inventories fell by 1.2 million barrels last week, according to analysts polled by S&P Global Platts. They also forecast a supply decline of 1 million barrels for gasoline and a stockpile increase of 2.5 million barrels for distillates.

The EIA will also release weekly data on natural-gas storage on Thursday. The analysts polled by S&P Global Platts, on average, expect the report to show an 81-billion cubic feet injection for the week ended May 22.

July natural-gas futures were up 0.1% at $1.887 per million British thermal units.

Source: Marketwatch