Oil prices fell on Wednesday, (10/26/2022) after data showed that U.S. crude inventories grew more than expected last week, although signs of strong gasoline demand and warnings about tighter supplies from Saudi Arabia kept losses at bay.

American Petroleum Institute (API) data on Tuesday showed that U.S. crude inventories grew by 4.5 million barrels in the week to Oct. 21, more than expectations for a 200,000-barrel increase.

While the reading likely reflects a drawdown from the Strategic Petroleum Reserve (SPR), it also signals a short-term surplus in oil supplies, which is negative for prices.

The figures come ahead of an official report expected to show U.S. crude inventories grew by 1 million barrels last week.

London-traded Brent crude futures fell 0.7% to $91.09 a barrel, while West Texas Intermediate crude futures fell 0.5% to $84.86 a barrel by 10:09 p.m. ET (02:09 GMT). Both contracts rose slightly on Tuesday.



Crude oil markets got off to a weak start to the week after a series of weaker-than-expected manufacturing readings raised concerns about worsening crude demand. Data from China, the world's largest crude importer, also showed that oil shipments to the country have slowed sharply this year.

Oil prices fell sharply from yearly highs as concerns about slowing demand and rising U.S. supplies weighed on the market. But prices have rebounded in recent weeks following supply cuts by the Organization of the Petroleum Exporting Countries and allies (OPEC+).

API data on Tuesday also showed that gasoline inventories fell sharply last week, indicating that U.S. fuel demand remains stable. The latest data from the U.S. Energy Information Administration showed that U.S. gasoline inventories hit an eight-year low in mid-October.

Further supporting crude prices, Saudi Arabia’s Energy Minister Abdulaziz bin Salman warned that Washington’s SPR supply cuts would lead to more pain in the coming months. The Biden administration began drawing down heavily from the SPR this year to combat a surge in oil prices, and has threatened more releases in response to OPEC+ supply cuts.

The SPR is currently at its lowest level since 1984, drawing criticism from Biden’s political rivals. While the US administration recently outlined plans to replenish the SPR, it would only do so when oil prices are well below current levels.

Such a scenario is unlikely in the near term, given that OPEC+ is threatening more supply cuts to keep prices high. Oil supplies could also tighten further on more curbs on Russia.

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