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Oil dips on U.S. inventory build, defies OPEC-led cut efforts

Posted by: Admin | Posted on: May 17th, 2017 | 0 Comments

LONDON Oil prices fell on Wednesday after industry data showed a surprise increase in U.S. crude inventories despite OPEC-led output cuts that Saudi Arabia and Russia want extended.

Brent crude was down 15 cents at $51.50 per barrel by 0851 GMT. U.S. light crude slid 26 cents to $48.40.

U.S. crude inventories rose by 882,000 barrels in the week ending May 12 to 523 million barrels, according to the American Petroleum Institute (API), defying expectations of a drop.

Data from the government’s Energy Information Agency, which is seen as more complete, is due later on Wednesday. Analysts have forecast a draw on inventories for the sixth week running, falling 2.4 million barrels.

“The oil rally has paused and whether it can resume depends on today’s EIA inventory report,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Brent reached $52.63 a barrel and WTI rose as high as $49.66 on Monday after Saudi Arabia and Russia agreed on the need to extend output curbs by members of the Organization of the Petroleum Exporting Countries and other producers.

The supply cuts of 1.8 million barrels per day (bpd) were initially agreed to run during the first half of 2017. Riyadh and Moscow say they should be extended until March. An extension is due to be discussed at an OPEC meeting on May 25.

“Having seen an initial short-covering rally, we now need OPEC and non-OPEC producers agreeing on the nine-month extension for the market to begin build up new long positions,” Saxo’s Hansen said.

Global stockpiles have remained stubbornly high despite the curbs, in part because U.S. production has climbed 10 percent since mid-2016 to 9.3 million bpd, not far off that of top producers Russia and Saudi Arabia.

Jefferies bank said it was lowering its oil price forecasts due to a surprisingly strong rise in U.S. production. It cut its Brent price estimate for the second half of 2017 to $59 per barrel from $61 previously.

North Sea oil output, generally seen in terminal decline, is expected to jump by a net 400,000 bpd in the next two years with new projects and greater efficiencies.

The International Energy Agency said on Tuesday commercial oil inventories in industrialized countries rose 24.1 million barrels in the first quarter of 2016.

Trade sources and Reuters shipping data indicated a rising number of tankers storing oil offshore China because facilities on land are full.

(Additional reporting by Henning Gloystein in Singapore; Editing by Edmund Blair)

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