Oil falls as US stocks increase

Tokyo — Oil prices resumed their slide on Wednesday, dragged down by a surprise gain in US inventories and comments from the head of Russian state oil producer Rosneft questioning the point of a deal with the Organisation of Petroleum Exporting Countries (Opec) to withhold supplies.

Brent futures were down 27c, or 0.4%, at $61.70 a barrel by 0152 GMT. They rose 1.1% on Tuesday after a near 13% fall in the previous four sessions.

US West Texas Intermediate (WTI) crude was down by 32c, or 0.6%, at $53.16 a barrel. The US benchmark closed 0.4% higher on Tuesday.

Oil prices have fallen sharply on fears about slowing global demand, but won a respite on Tuesday after a global stock market rally on hopes of a cut in US interest rates.

US crude stocks rose unexpectedly last week, while petrol and distillate inventories built more than expected, industry group the American Petroleum Institute said on Tuesday.

Crude inventories rose by 3.5-million barrels in the week to May 31 to 478-million, compared with analysts’ expectations for a decrease of 849,000 barrels.

Official numbers from the US energy information administration (EIA) are due out later on Wednesday.

“It was a very bearish number and if confirmed by the EIA it will hammer prices,” said Stephen Innes, managing partner at SPI Asset Management in Bangkok.

The oil market has been weighed down by concerns about slowing global growth from the US-Sino trade war and President Donald Trump’s threats last week to place tariffs on Mexican imports.

To prevent oversupply and prop up the market, Opec together with allies including Russia, has been withholding production since the start of 2019. The group plans to decide later in June or in early July whether to continue the supply curbs.

But on Tuesday, the head of oil giant Rosneft, Igor Sechin, said Russia should pump at will and he would seek compensation from the government if cuts were extended.

Russia’s average daily oil output has nonetheless dropped to a three year-low after contaminated crude clogged its main export route.

Further pressuring oil prices and undermining Opec’s efforts to tighten the market has been surging US output to record highs, leading to more of its crude being exported.

“Does it make sense (for Russia) to reduce (oil output) if the US immediately takes (our) market share?” Sechin was quoted as saying by Interfax news agency. “We have to defend our market share,” he said.

Reuter

Source: businesslive.co.za