Oil dips on demand worries after unexpected US crude build

Oil prices fell for a second day on Wednesday (17 May) after a surprise rise in US crude inventories stoked demand concerns on the heels of weaker-than-expected economic data from the United States and China, the world's two biggest oil consumers.

Brent crude futures LCOc1 slipped 49 cents, or 0.7%, to $74.42 a barrel. US West Texas Intermediate crude CLc1 was down 55 cents, or 0.8%, to $70.84 at 0657 GMT.

"Crude prices remain heavy as energy traders just can't shake off global demand concerns. It doesn't matter how upbeat everyone is for China's second half of the year, the current situation is too disappointing," said Edward Moya, an analyst at OANDA.

US crude stockpiles rose by about 3.6 million barrels in the week ended 12 May, according to market sources citing American Petroleum Institute figures. Seven analysts polled by Reuters had expected a 900,000 barrel drawdown.

US government data on crude and product stockpiles is due at 1430 GMT. EIA/S

The crude inventory build added to concerns about US growth after data showed retail sales rose 0.4% in April, short of estimates for an increase of 0.8%.

Talks on raising the US debt ceiling continue to weigh on the market. The US Treasury Department has estimated that the United States will go into a crippling default as early as June 1 if Congress does not lift the ceiling.

In China, April industrial output and retail sales growth undershot forecasts, suggesting the economy lost momentum at the beginning of the second quarter.

"Sentiment soured amid stalled US debt ceiling talks and disappointing retailers' earnings overnight. Recession fears again dragged on the global markets," said Tina Teng, an analyst at CMC Markets.

Markets are closely following any new steps on expanding sanctions on Russia by the Group of Seven (G7) leaders when they meet in Japan on 19-21 May.

The G7 is looking to target sanctions evasion involving third countries, aiming to limit Russia's future energy production and curb trade that supports Russia's military, officials with direct knowledge of the discussions have said.