Oil prices fell on Wednesday as an unexpected build in U.S. crude inventories weighed on markets, along with concerns that Chinese crude demand could falter as Beijing clamps down on alleged tax evasion in the oil industry.
International Brent crude oil futures LCOc1 were trading at $49.32 a barrel at 0614 GMT (0214 ET), down 64 cents, or 1.3 per cent, from their last close.
U.S. West Texas Intermediate (WTI) crude was down 72 cents, or 1.5 per cent, at $47.38 a barrel.
Robust Chinese crude demand growth has been driven by independent refiners, also known as teapots, who began to import crude last June after obtaining government crude import quotas and licence.
But Beijing’s crackdown on alleged tax evasion in the oil industry, targeting the teapots, threatens to put a lid on Chinese demand.
“The question now is whether the teapots will start cutting runs,” a Singapore-based trader said, adding that falling Chinese demand would be a double whammy for the oversupplied crude market.
Reinforcing concerns about market oversupply, U.S. crude stockpiles surprisingly rose last week, even though gasoline inventories fell sharply and distillate stocks drew, data from industry group the American Petroleum Institute showed on Tuesday.
“We are seeing a little reaction on the API data which has posted higher inventories,” said Ric Spooner, chief market analyst at CMC Markets.