Mubasher: Oil futures declined on Wednesday following an unexpected build in US crude inventories, while Chinese industrial production expanded less than expected in April, Reuters reported.
However, crude prices were lent a support amid escalating tensions in the Middle East.
By 7:38 am GMT, US Nymex crude futures dropped by 0.96% to $61.19 per barrel (pb), while global benchmark Brent futures fell by 0.53% to $70.86 pb.
Industry group the American Petroleum Institute (API) reported on Tuesday that US oil stockpiles surprisingly jumped by 8.6 million barrels in the week ended 10 May to 477.8 million, compared with expectations of a decline of 800,000 barrels by Reuters analysts.
It is worth noting that official figures pertaining to US crude inventories are due to be released by Energy Information Administration (EIA) later in the day.
“If the EIA report confirms a strong build we could see that weigh on oil prices [...] but too many geopolitical risks remain that should keep prices supported,” OANDA senior market analyst Edward Moya told Reuters via e-mail.
Elsewhere, Chinese industrial production growth lost more pace than expected at 5.4% last April, down from its highest peak since four years and a half recorded in March.
This underpinned expectations that the government in Beijing will have to implement more stimulus measure as a trade conflict with Washington escalates.
That said, oil markets gained support after Saudi Arabia on Tuesday announced that armed drones attacked two of its pumping oil stations.
This came a couple of days after the sabotage of oil carriers off the shore of the UAE, while the US military prepared for “possibly imminent threats to US forces in Iraq” from Iran-backed forces.
The attacks came amid the tension between the US and Iran after Washington pushed this month to slash Iranian crude exports to zero, while reinforcing its military presence in the Gulf to counter any Iranian threats.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday said that global demand for its crude output will be stronger than expected, as supply from US shale producers grows slower.
This means a tighter market supply, if the producer club decides to withhold its output, Reuters said.