Energy

Oil prices slip, but settle near 2019 highs on China growth, lower US crude stockpiles

Key Points
  • China's first-quarter GDP rises 6.4% year-on-year, while March refinery throughput is up 3.2% over the same period.
  • U.S. crude stockpiles fell by 1.4 million barrels in the last week, compared with analysts' expectations for an increase of 1.7 million barrels in a Reuters survey.
  • OPEC supply cuts and U.S. sanctions on Iran and Venezuela support oil prices.
Andrew Burton | Getty Images

Oil prices slipped on Wednesday after Brent crude earlier hit a 2019 high above $72 a barrel, supported by steady economic growth in China and data showing U.S. crude stockpiles shrank last week.

U.S. West Texas Intermediate crude futures settled 29 cents lower at $63.76 per barrel, down half a percent but not far from last week's 2019 closing high at $64.61.

International benchmark Brent crude oil fell 10 cents to $71.62 a barrel, after earlier touching $72.27, the highest since Nov. 8.

U.S. crude inventories fell by 1.4 million barrels in the last week, compared with analysts' expectations for an increase of 1.7 million barrels in a Reuters survey. However, the official data from the Energy Information Administration on Wednesday was about half the decline reported by the American Petroleum Institute on Tuesday.

"The rally overnight was predicated on a 3 million-barrel per day draw in crude that did not materialize," said Bob Yawger, director of energy futures at Mizuho in New York. "You're going to need another catalyst."

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Crude remained supported by steady economic growth in China.

China's economy grew by 6.4 percent in the first quarter, official data showed, defying expectations for a further slowdown and assuaging global markets as a U.S.-China trade deal also appears near.

Refinery throughput in China — the world's second-largest crude user — rose 3.2 percent in March from a year earlier.

"The demand side of the equation got a substantial fillip via today's China data suggesting prices will continue to move higher on improving global growth and risk sentiment," said Stephen Innes, head of trading at SPI Asset Management.

Prices have been supported this year by a pact reached by the Organization of the Petroleum Exporting Countries and allies, including Russia, to limit their oil output by 1.2 million bpd.

Global supply has been tightened further by U.S. sanctions on OPEC members Venezuela and Iran.

Iran's crude exports have dropped in April to their lowest daily level this year, tanker data showed and industry sources said, suggesting a drawdown in buyer interest ahead of expected further pressure from Washington.

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"Buyers are shying away in view of U.S. policy uncertainty regarding waivers to import Iranian crude oil," BNP Paribas strategist Harry Tchilinguirian told the Reuters Global Oil Forum.

In June, OPEC and its partners will decide whether to continue to curb their production, although concerns have arisen over Russia's willingness to stick with the cuts.

Gazprom Neft, the oil arm of Russian gas company Gazprom, expected the global oil deal between OPEC and its allies to end in the first half of the year, a company official said on Tuesday.

"As the possibility of Russia ending the OPEC deal remains, that is capping further gains," said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

— CNBC's Tom DiChristopher contributed to this report.