Oil falls as US inventories rise but demand hopes stem bigger drop

Oilprices fell on Wednesday afterUSindustry data showed a surprisebuild-up in crudeinventoriesbut losses were kept in check by expectations for an uptick indemandnext year on the back of progress in resolving theUS-China trade row.

Brent crude futuresdropped 41 cents, or 0.6 per cents, to $65.69 a barrel by 0940 GMT on Wednesday. West Texas Intermediate (WTI) crude futures fell 52 cents, or 0.9 per cents, to $60.42 per barrel.

Prices hadrisen more than 1 per centin the previous session after the announcement last week of the so-called Phase One of aU.S.-China trade deal, which lifted global economic prospects and improved the outlook for energydemand.

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"The sizzlingoilmarket rally came to a grinding halt after an unexpected climb in the weeklyUScrude inventory report," said Stephen Innes, market strategist at AxiTrader, although he said figures for stocks were "unlikely to be a game-changer."

"Investors have transcended the trade deal-inspired relief rally euphoria, and are now banking on a fundamentaldemand-driven shift that could quicken the pace of theoilmarket rebalancing in the first quarter of 2020," he said.

UScrudeinventoriesclimbed 4.7 million barrels in the week to December13 to 452 million, compared with analysts' expectations for a draw of 1.3 million barrels, data from industry group the American Petroleum Institute showed.

Data from theUSEnergy Information Administration (EIA) is due later on Wednesday.

"As much as the API has taken the wind out of bulls' sails, the lull inupside is expected to be short-lived. After all, recent positive developments have givenoilfundamentals for next year a supportive shot in the arm," said Stephen Brennock ofoilbroker PVM.

Deeper production cutscoming from the Organization of the Petroleum Exporting Countries and its allies, such as Russia, which make up a group known as OPEC+, also continued to offer some support and prevented a further slide in prices.

OPEC+, which has cut production by 1.2 million barrels per day (bpd) since January 1 this year, will make a further output cut of 500,000 bpd from January 1, 2020, to support the market.