Oil prices dropped on Wednesday after Reuters reported Saudi Arabia and the United Arab Emirates had reached a compromise that should unlock an OPEC+ deal to boost global oil supplies as the world recovers from the coronavirus pandemic.
The benchmarks extended their losses after government data showed implied US gasoline demand declining considerably last week. While the US Energy Information Administration said crude stockpiles declined more than expected, in their eighth consecutive draw, the drawdown was overshadowed by lagging gasoline demand.
“After last week’s emphatic print, implied gasoline demand has dropped off considerably, resulting in a build to gasoline inventories,” said Matt Smith, director of commodity research at ClipperData.
US fuel stocks were higher even as refinery runs eased back a bit. Gasoline stocks rose by 1 million barrels, compared with expectations for a 1.8 million-barrel drop.
Brent crude was down $ 1.10 a barrel, or 1.45%, at $ 75.36 a barrel by 1430 GMT. West Texas Intermediate was off by $ 1.55, or 2%, at $ 73.73 a barrel.
Prices fell earlier in the session after the two Gulf producers agreed for the UAE to increase its baseline production in an output deal that members of the Petroleum Exporting Countries, Russia and other producers, a group known as OPEC+, reached last year, an OPEC+ source told Reuters.
The agreement should now pave the way for OPEC+ members to extend a deal to curb output until the end of 2022, the sources added.
The UAE energy ministry said in a statement that no deal with OPEC+ on its baseline has been reached and deliberations were continuing.
Disagreement between OPEC’s defacto leader Saudi Arabia and the UAE led to a collapse in talks last week on boosting production to cool oil prices.
Oil prices were earlier under pressure after data showed China’s crude imports dropped by 3% from January to June compared with a year earlier, the first such contraction since 2013, as import quota shortages, refinery maintenance and rising global prices curbed buying.
“Imports were scaled back as surging prices for crude oil have eroded refinery profit margins,” Eurasia Group said in a note.
The International Energy Agency said global withdrawals from storage in the third quarter were set to be the most in at least a decade, pointing to early June stock draws in the United States, Europe and Japan.