Oil Shifts Lower in Wednesday Trade

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Brent crude on the Intercontinental Exchange shifted lower in overnight trade on a larger-than-expected build in U.S. crude inventories, while concerns over attacks on Saudi Arabia oil infrastructure limit the downside.

Nymex June West Texas Intermediate futures were down $0.65 near $61.15 per barrel (bbl) near 9 a.m. ET, with ICE July Brent $0.40 lower near $70.85 bbl. Nymex June RBOB futures were down 0.35 cents near $1.9735 gallon, and the June ULSD contract was flat near $2.0585 gallon.

The American Petroleum Institute reported on Tuesday U.S. inventories increased by a surprise 8.6 million bbl last week, missing calls for a draw of 2.3 million bbl. API data also showed gasoline inventories gained 567,000 bbl versus an expected build of 750,000 bbl, while distillate inventories jumped by 2.2 million bbl, five times above the calls for a 440,000 bbl increase.

Energy Information Administration will release official supply figures at 10:30 a.m. ET.

Oil futures rallied on Tuesday after Saudi Arabia's main oil pipeline was hit by an armed drone strike, fueling concerns over coordinated attacks on key oil infrastructure and transit routes in the Middle East. The assault came just days after explosive strike on Saudi oil tankers near the Strait of Hormuz transit chokepoint.

Houthi rebels in neighboring Yemen claimed responsibility for the incident, while Islamic Republic of Iran is believed to have executed the attack on oil tankers. Antagonism between the United States and Iran intensified this month after U.S. President Donald Trump ended exceptions to sanctions on Iranian oil sales.

International Energy Agency cut its projection for world oil demand by 90,000 barrels per day (bpd) in 2019 for a year-on-year growth of 1.3 million bpd. IEA lifted non-OPEC supply growth for 2019 by 200,000 bpd for an annual growth rate of 1.9 million bpd and supply at 64.6 million bpd. That compares with year-on-year non-OPEC supply growth of 2.8 million bpd for 2018.

In its Monthly Oil Market Report released Tuesday, OPEC revised down non-OPEC supply growth by 33,000 bpd to average 2.14 million bpd for this year, pointing to a slowdown in U.S. oil production growth. OPEC estimates demand for its oil to average at 30.58 million bpd, suggesting that global oil inventories are set to decline further.

Liubov Georges can be reached at liubov.georges@dtn.com