Oil prices down as US inventory builds by 7.3-million barrels

Singapore/London — Oil prices eased on Wednesday as bullish output forecasts by two big US producers and a build in weekly US crude stockpiles outweighed oil cartel Opec-led production cuts.

Brent crude futures were at $65.74 a barrel at 2.16pm GMT, down 12c from their last settlement. US West Texas Intermediate (WTI) crude oil futures were down 45c at $56.11 a barrel.

“Crude oil futures continue to demonstrate whippy trades as markets balance between Opec-led cuts and the effects of rising US production levels,” said Benjamin Lu, commodities analyst at Singapore-based brokerage firm Phillip Futures. Increasingly, event-driven trading is adding to market volatility, he said.

Chevron and ExxonMobil released rival Permian Basin projections on Tuesday pointing to increased shale oil production. If realised, the increases will cement the pair as the dominant players in the West Texas and New Mexico field, with one-third of Permian production potentially under their control within five years.

Data from the American Petroleum Institute (API), an industry group, also showed larger-than-expected gains in US crude stockpiles.

US crude inventories rose by 7.3-million barrels in the week ending March 1 to 451.5-million, compared with analysts’ expectations for an increase of 1.2-million barrels, the API said. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.1-million barrels.

“An increase in US crude inventories is weighing on oil prices and, in the long term, concerns over rising oil production in the Permian region are keeping a lid on prices,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

Official data from the US government’s Energy Information Administration (EIA) is due later on Wednesday.

The rise in North American production undermines supply cuts led by Opec, which, with its allies, have pledged to curb output by 1.2-million barrels per day (bpd), and they are likely to push back their decision whether to extend the production agreement to June from April, sources said.

Reuters