Oil prices declined on Thursday, reversing the previous session’s gains on signs of weak U.S. demand after government data showed an unexpected increase in inventories in the world’s biggest oil consumer.
As of 4:00 GMT, Brent crude futures fell 49 cents, or 0.71 percent, to $68.62 a barrel after gaining 3 percent on Wednesday. Meanwhile, U.S. West Texas Intermediate crude fell 44 cents, or 0.65 percent, to $67.01 a barrel after climbing 3.1 percent yesterday.
Increase in U.S inventories raises demand concerns
The U.S. Energy Information Administration said on Wednesday that domestic crude inventories rose by 3.8 million barrels to 419 million barrels last week. Meanwhile, gasoline demand dropped to 8.6 million barrels per day, triggering concerns over low consumption in the peak U.S. summer driving season.
Further adding pressure on oil prices, sources indicated that American Petroleum Institute data released late on Tuesday revealed U.S. crude oil inventories increased by 680,000 barrels over the past week, a period when stockpiles typically decline due to summer demand.
Oil prices had risen on Wednesday after Iran suspending cooperation with the U.N. nuclear watchdog, raising concerns that the conflict over its nuclear program may once again escalate into armed conflict.
In addition, the U.S. and Vietnam reached a trade deal that sets 20 percent tariffs on many of the country’s exports, further supporting prospects of stability in international trade and the economy, which could lead to an increase in oil demand.
Read: Saudi Arabia boosts crude oil exports to highest in over a year ahed of OPEC meeting
Market awaits key U.S. data
Investor focus is now shifting to the release of the key U.S. monthly employment report on Thursday, which is expected to impact expectations surrounding the timing and size of the next interest rate cut by the Federal Reserve. Lower interest rates could support economic activity, which would in turn boost oil demand and prices.
A private payrolls report on Wednesday showed a contraction for the first time in two years, but analysts cautioned there is no correlation between it and the government data.
