Investing.com -- Oil prices crept lower in early Asian trade on Wednesday as industry data pointed to an unexpected build in U.S. crude inventories, while anticipation of key U.S. inflation data later in the day kept markets on edge.
Crude prices were sitting on strong gains this week as easing fears of a U.S. banking crisis helped markets stem a three-week rout. Reports that the White House plans to begin replenishing the Strategic Petroleum Reserve - which was drawn to 40-year lows over the past year - also sent buy signals to markets.
But this was somewhat offset by American Petroleum Institute data showing that U.S. inventories grew an unexpected 3.6 million barrels in the week to May 5. The reading, which signals softening U.S. demand, usually heralds a similar trend in official data, which is due later on Wednesday.
Brent oil futures fell 0.1% to $77.23 a barrel, while West Texas Intermediate crude futures fell 0.3% to $73.50 a barrel by 21:18 ET (01:18 GMT). Both contracts were trading up between 2.7% and 3.1% this week, as they recovered from a 17-month low hit last week.
Signs of a cooling economic recovery in China presented fresh headwinds to oil markets this week, as recent trade data showed that oil shipments to the world’s largest oil importer slumped 16% in April.
A post-COVID economic rebound in the country largely appears to be running out of steam amid a weak manufacturing and property sector, which has drawn questions over whether China will fuel a recovery in oil demand this year.
The U.S. Energy Information Administration also cut its Brent and U.S. crude price forecasts for the year, citing increased U.S. production and weaker-than-expected demand.
Oil prices are still trading down around 8% to 10% for the year, as concerns over slowing economic growth and rising interest rates battered the outlook for demand. Fears of a recession in the U.S., the world’s largest oil consumer, were the key weight on oil prices in recent sessions, especially in the face of a potential banking crisis in the country.
Markets are now seeking fresh cues on the U.S. economy from consumer price index inflation data due later on Wednesday. The reading is expected to show that inflation eased slightly in April, but still remained well above the Federal Reserve’s 2% target.
Stubborn inflation could invite a more hawkish stance from the Fed, keeping interest rates higher for longer and further damaging economic growth this year.