Oil Prices Fall as Surprise U.S. Crude Inventory Build Outweighs Saudi Supply Risks

Oil prices declined on Wednesday, reversing sharp gains from the previous session, after a report pointed to a significant and unexpected build in U.S. crude inventories. The data countered supply-side anxieties stemming from the suspension of a major Saudi Arabian pipeline.

International benchmark Brent crude futures fell 93 cents, or 0.86%, to $107.82 a barrel by 0028 GMT. U.S. West Texas Intermediate (WTI) futures dropped 97 cents, or 0.92%, to $104.86 a barrel. The downturn follows a rally on Tuesday that saw both benchmarks settle more than $3 higher at their highest point since May 19.

U.S. Stockpiles Surge

The primary driver for the price drop was bearish inventory data from the American Petroleum Institute (API), according to market sources. The report indicated that U.S. crude stockpiles rose by a substantial 7.1 million barrels for the week ended September 11.

This figure starkly contrasted with market expectations. A Reuters poll of analysts had forecast a draw of about 1.6 million barrels. The API data also showed surprising builds in gasoline and distillate inventories, adding to the negative sentiment and suggesting potentially weaker-than-anticipated fuel demand in the world's largest oil consumer.

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Geopolitical Risks Remain

Despite the inventory build, the market continues to monitor significant supply disruptions. Oil loadings at Saudi Arabia's Yanbu port were suspended after an attack by Yemen's Iran-aligned Houthis on the country's critical East-West pipeline. This pipeline is used to reroute approximately 4 million barrels per day, or about 4% of global supply, to the Red Sea.

While the U.S. energy secretary stated that crude flows should resume within days, other sources cited by Reuters provided varying estimates for repairs, with one suggesting it could take five to six weeks. Separately, Libya's National Oil Corporation (NOC) reported that operations at three oil fields were suspended due to protests, though its chairman said overall national production of about 1.4 million barrels per day was not significantly affected.