Oil falls but losses limited by new Brexit deal

crude oil barrels

London — Oil prices fell on Thursday as industry data showed a larger-than-expected increase in U.S. inventories but losses were limited after Britain and the European Union announced they had reached a deal on Brexit.

Global benchmark Brent crude was down 37 cents at $59.05 a barrel by 1330 GMT. U.S. WTI crude was also down 37 cents, at $52.99.

U.S. crude inventories soared by 10.5 million barrels to 432.5 million barrels in the week to Oct. 11, the American Petroleum Institute’s weekly report showed, ahead of official government stocks data due on Thursday.

Analysts had estimated U.S. crude inventories rose by 2.8 million barrels last week.

“U.S. sanctions imposed on Chinese shipping company COSCO are seriously denting demand for imported crude … This has a profound impact on U.S. crude oil inventories as reflected in last night’s API report,” said Tamas Varga, an analyst at PVM Oil Associates.

“U.S. refinery maintenance is not helping to reverse the current trend and further builds in U.S. crude oil inventories can be expected in the next few weeks.”

The United States imposed sanctions on COSCO Shipping Tanker (Dalian) Co and subsidiary COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co for allegedly carrying Iranian oil.

Adding to concerns about the global economy – and therefore oil demand – data from the United States showed retail sales in September fell for the first time in seven months. Earlier data showed a moderation in job growth and services sector activity.

Still, Brexit developments helped limit oil’s decline. Prime Minister Boris Johnson said Britain and the EU had agreed a “great” new deal and urged lawmakers to approve it at the weekend.

Analysts have said any agreement that avoids a no-deal Brexit should boost economic growth and oil demand.

However, the Northern Irish party Johnson needs to help ratify any agreement has refused to support the pact.

Hopes of a potential U.S.-China trade deal also supported oil. The commerce ministry in Beijing said China hoped to reach a phased agreement with Washington as early as possible.

But the German government has lowered its 2020 forecast for economic growth to 1.0% from 1.5%, the economy ministry said.

It said Germany, Europe’s largest economy, was not facing a crisis.