Oil loses ground as traders take profits

Singapore — Oil fell for a third consecutive session on Wednesday as investors took profits while looking ahead to US inventories data due later in the day for pointers on where prices will head next.

Brent crude for May dropped 56c, or 0.8%, to $66.96 a barrel by 4.14am GMT, while US West Texas Intermediate crude for April was at $63.56 a barrel, down 45c, or 0.7%.

Prices gained support last week from the Opec+ (oil cartel Opec and allied producers) decision to largely maintain production cuts in April. They then initially jumped on Monday, with Brent rising above $70 a barrel, after attacks by Yemeni Houthis on Saudi’s oil heartland, before settling back as the alarm subsided.

“It’s a realisation that there was no impact on supply from the attack,” Virendra Chauhan, a Singapore-based analyst at consultancy Energy Aspects said.

A combination of factors including top importers China and India drawing crude from storage at current high prices and the expectation of a return in Iranian supplies have also cooled prices, he said.

In the US, crude inventories rose by 12.8-million barrels in the week to March 5, according to trading sources, citing data from industry group the American Petroleum Institute. Analysts had expected a build of about 800,000 barrels in a Reuters’ poll.

Official figures from the Energy Information Administration (EIA) are expected Wednesday.

Meanwhile, higher prices are expected to bring more US crude supplies back online.

US crude production is still expected to fall by 160,000 barrels a day in 2021 to 11.15-million barrels a day, the EIA said on Tuesday, but that is a smaller decline than its previous monthly forecast for a 290,000 barrel-a-day drop.

Opec may become the victim of its own success, analysts at EFG bank said, as higher prices resulting from supply restraint could incentivise US oil production.

“The current WTI oil price is well above the level needed to incentivise a substantial increase in US production, which according to surveys by the Dallas Fed and the Kansas City Fed stands at around $56 a barrel,” EFG said.

“The longer it remains above this threshold, the greater the incentive for Us and other non-Opec+ producers to increase production.”

Reuters

Source: businesslive.co.za