America’s total petroleum stockpiles jump by most since 1990
WTI crude is little changed after tumbling 3.4% on Wednesday

By Saket Sundria and Grant Smith

(Bloomberg) —

Oil held steady after sinking into a bear market on Wednesday amid ballooning U.S. crude inventories and signs that demand is faltering.

Futures in New York were little changed after falling 3.4% in the previous session. U.S. total petroleum stockpiles jumped by 22 million barrels last week, the biggest increase in data going back to 1990, according to government figures. Data from countries representing around half of global oil consumption show that year-on-year demand growth ground to a halt in March and April, Morgan Stanley said in a note, cutting its Brent forecast for the second half.

U.S. sees biggest stockpile gain in almost 30 years

“Everything that could have gone wrong for oil bulls yesterday did go wrong,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. “For those of us who have been expecting significant drawdowns in global oil inventories, maybe it is time to go back to the drawing board.”

Oil has fallen more than 20% since late April as the U.S.-China trade relationship worsened and the White House picked a new tariff fight with Mexico. That’s caused a sharp deterioration in the demand outlook, while the American inventories data are now giving investors additional cause for worry. A meeting of the Saudi and Russian energy ministers in St. Petersburg this week may give some clues as to their response.

West Texas Intermediate futures for July added 6 cents, or 0.1%, to trade at $51.74 a barrel on the New York Mercantile Exchange at 9:22 a.m. local time.

Brent for August settlement advanced 29 cents to $60.92 a barrel on London’s ICE Futures Europe Exchange, after closing down 2.2% on Wednesday. The global crude benchmark traded at a premium of $9.03 to WTI for the same month.

A combination of weak oil demand, soaring imports, record domestic production and lackluster refinery runs drove the jump in total U.S. inventories, accordingto Bloomberg oil strategist Julian Lee. Crude stockpiles are now at the highest level since July 2017.

The plunge of 12% in Brent crude over the three days through Monday is “highly unusual” and may be pointing to a bleak demand outlook, Morgan Stanley said in the note. The lender cut its fourth-quarter Brent forecast to $67.50 a barrel from $77.50 and lowered its WTI projection to $60.50 from $70.50.

See also: Trump Says ‘Not Nearly Enough’ Progress in Talks With Mexico

The meeting in St. Petersburg will pit the Saudis, who want to extend the OPEC+ coalition’s output cuts beyond June, against the Russians, who have at best been non-committal. It will be the first face-to-face meeting between the two nations’ energy ministers since Jeddah in May, when the gap between their interests became visible.

President Vladimir Putin emphasized the differences between the two architects of the OPEC+ deal. He reiterated the desire to continue cooperation, but noted that his country is happy with a lower oil price than its Saudi allies and declined to say whether he supports an extension of production cuts.

Other oil-market news

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OPEC and its partners will take the current “economic bearishness” into account when they meet in coming weeks, and are committed to keeping oil markets balanced this year and beyond, Secretary-General Mohammad Barkindo said.
Russia is shipping more crude from its main Baltic and Black Sea ports this month than originally planned as the nation tries to lessen the impact of a contamination crisis that halted its key export pipeline to Europe.
Iranian exports of crude and condensate collapsed to 350,000-400,000 barrels a day in May with the onset of tougher U.S. sanctions, from an average of 1.5 million barrels a day during the first quarter, according to consultant FGE.

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With assistance from James Thornhill, Shery Ahn and Paul Allen.

To contact the reporters on this story:
Saket Sundria in Singapore at ssundria@bloomberg.net;
Grant Smith in London at gsmith52@bloomberg.net

To contact the editors responsible for this story:
James Herron at jherron9@bloomberg.net
Amanda Jordan, Christopher Sell