- Decline in stockpiles just one-fifth of expected withdrawal
- WTI dropped 3.8% as EIA report adds to U.S.-China tension
Oil was on track for its worst monthly loss this year after a smaller-than-expected withdrawal from U.S. storage facilities fueled worries about weakening demand.
Futures tumbled 3.8% in New York on Thursday, extending May’s loss to 11%, after the U.S. Energy Information Administration said domestic inventories shrank by 282,000 barrels last week, just one-fifth the average estimate in a Bloomberg survey. Meanwhile, American gasoline stockpiles expanded for the second straight week despite the onset of the summer driving season in the U.S.
After starting 2019 on a tear because of OPEC’s production cuts, gaining more than 45% through late April, oil has lost 14% since then amid concerns that the escalating U.S.-China trade war will crimp energy consumption. That’s overwhelmed supply risks in the oil-rich Persian Gulf posed by rising tensions between America and Iran, raising volatility for crude markets.
“The concern revolves around the demand side of the equation,” said Nick Holmes, who helps oversee $16 billion in energy investments for Kansas-based money manager Tortoise. “This report, with the gasoline build at this time of the year, continues to stoke those fears.”