Oil prices started Wednesday trade in Asia lower, extending the slide from late on Tuesday, when an industry report of a surprise U.S. crude inventory increase stopped the rise in prices earlier in the day.
The American Petroleum Institute (API) on Tuesday reported a build in crude oil inventories of 806,000 barrels for the week ending July 16, bringing the total 2021 crude draw so far to a hair under 50 million barrels, using API data.
However, the API report of a rise in crude stockpiles contrasts with analyst expectations of an inventory draw of 4.333 million barrels for the week.
The API also reported a build in gasoline inventories of 3.307 million barrels for the week ending July 16—compared to the previous week's 1.545-million-barrel draw.
The gain in gasoline stocks is bearish news for the oil market, if confirmed by the weekly inventory report of the Energy Information Administration (EIA) due out later on Wednesday.
Early on Wednesday in Asia trade, WTI Crude prices were down 0.45 percent at $66.89 and Brent Crude was down 0.49 percent, barely holding on to the $69 a barrel handle, at $69.05.
But prices began to recover toward the open.
WTI traded up $1.74 by 9:53 a.m. EDT, at $68.94. Brent crude breached the $70 per barrel mark after climbing $1.67, or 2.41% to land at $71.02.
"Crude futures were unwinding Tuesday's modest recovery early Wednesday in Asia after American Petroleum Institute data showed builds in US oil stockpiles for the week ended July 16, renewing the demand-led bearishness that has engulfed the oil complex since Monday," Vanda Insights said in a note early on Wednesday.
"While we saw a bit of a relief rally yesterday following Monday's sell-off, the market is still trading below US$70/bbl and has come under a bit of downward pressure in early morning trading today after a bearish and rather surprising inventory report from the API," ING strategists Warren Patterson and Wenyu Yao said early on Wednesday.
The EIA will be the next oil price catalyst.
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"If EIA numbers confirm a stock build later today, it would be the first increase in crude oil inventories since mid-May," they noted.
By Tsvetana Paraskova for Oilprice.com
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That is why oil prices are starting to rise again with Brent crude headed towards $80 in the third quarter of 2021.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London