LONDON: Oil prices fell on Wednesday after US industry data showed a surprise build up in crude inventories but losses were kept in check by expectations for an uptick in demand next year on the back of progress in resolving the US-China trade row.
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Brent crude futures dropped 41 cents, or 0.6 per cent, to $65.69 a barrel by 0940 GMT on Wednesday. West Texas Intermediate (WTI) crude futures fell 52 cents, or 0.9 per cent, to $60.42 per barrel.
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Prices had risen more than 1 per cent in the previous session after the announcement last week of the so-called Phase One of a US-China trade deal, which lifted global economic prospects and improved the outlook for energy demand.
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“The sizzling oil market rally came to a grinding halt after an unexpected climb in the weekly US crude inventory report,” said Stephen Innes, market strategist at AxiTrader, although he said figures for stocks were “unlikely to be a game-changer.”
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“Investors have transcended the trade deal-inspired relief rally euphoria, and are now banking on a fundamental demand-driven shift that could quicken the pace of the oil market rebalancing in the first quarter of 2020,” he said.
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US crude inventories climbed 4.7 million barrels in the week to December 13 to 452 million, compared with analysts’ expectations for a draw of 1.3 million barrels, data from industry group the American Petroleum Institute showed.
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Data from the US Energy Information Administration (EIA) is due later on Wednesday.
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“As much as the API has taken the wind out of bulls’ sails, the lull in upside is expected to be short-lived. After all, recent positive developments have given oil fundamentals for next year a supportive shot in the arm,” said Stephen Brennock of oil broker PVM.
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Deeper production cuts coming from the Organization of the Petroleum Exporting Countries and its allies, such as Russia, which make up a group known as Opec+, also continued to offer some support and prevented a further slide in prices.
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Opec+, which has cut production by 1.2 million barrels per day (bpd) since January 1 this year, will make a further output cut of 500,000 bpd from January 1, 2020, to support the market.
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