Oil prices slip on surprise build in US crude stocks

Oil prices fell in early trade on Wednesday after industry data showed a big build in US crude inventories, rather than the decline forecast by analysts, reinforcing fears about weakening demand even as supply tightens.

US West Texas Intermediate (WTI) crude futures fell 30 cents, or 0.4 per cent, to $75.09 at 0128 GMT, paring a 3 per cent gain from the previous session.

Brent crude futures dropped 38 cents, or 0.5 per cent, at $80.30 per barrel.

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US crude inventories rose by about 7.8 million barrels in the week to December 9, according to market sources citing data from the American Petroleum Institute, while analysts polled by Reuters had expected a 3.6 million barrel drop in stocks.

Product stocks also jumped, with gasoline inventories up by about 900,000 barrels and distillate stocks up by 3.4 million barrels, API data showed.

The rise in gasoline stocks was smaller than analysts had expected, but the build in distillate stocks, which include heating oil and jet fuel, was more than expected.

The inventory data defied bullish sentiment which sent the market up 3 per cent in the previous session on hopes of a revival in Chinese demand with the easing of Covid restrictions and on a weakening dollar after data showed US inflation subsiding.

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ANZ Research analysts, citing data from Chinese firm VariFlight, highlighted signs of domestic travel picking up in China, with flight activity having surged to around 65 per cent of pre-pandemic levels on Monday, up from 22 per cent on Nov. 29.

The market has also been supported this week by the outage of TC Eenrgy Corp's Keystone Pipeline, which ships 620,000 barrels per day of Canadian crude to the United States.