Oil prices down on rising inventories and US output

Tokyo/London — Oil prices fell for a second day on Thursday, with Brent briefly edging below $69 a barrel because of rising inventories and production in the US, but losses were limited as supply tightened elsewhere.

Brent futures were down 28c at $69.03 by 9.54am GMT. Brent fell 6c on Wednesday, after touching $69.96 — the highest since November 12, when it last traded above $70.

US West Texas Intermediate (WTI) crude fell 18c to $62.28 a barrel. The contract dropped 12c in the previous session after hitting $62.99, also the highest since November.

Crude oil inventories in the US rose by 7.2-million barrels last week. Analysts had forecast a decrease. US crude production climbed by 100,000 barrels per day (bpd) to a record 12.2-million bpd, government data showed.

Global benchmark Brent has gained nearly 30% this year, while WTI has risen nearly 40%. Prices have been underpinned by US  sanctions on Iranian and Venezuelan crude, oil cartel Opec production cuts and rising global demand.

“There is a clear bias to the upside with the supply restrictions,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “And there’s a much-better-than-expected demand picture after the recent China and US PMI numbers, along with a potential kicker from any US-China trade agreement.” 

The Caixin/Markit services purchasing managers’ index (PMI) rose to 54.4, the highest since January 2018 and up from February’s 51.1, a fourth-month low, a private business survey of China’s service sector showed on Wednesday.

Trade talks between the US and China made “good headway” last week in Beijing and the two sides aim to bridge differences during further talks, White House economic adviser Larry Kudlow said on Wednesday.

The refinery maintenance season is also drawing to a close and that will provide further demand for crude, said Virendra Chauhan, oil analyst at Energy Aspects in Singapore. “The physical market is very strong and we are now starting to trade post-turnaround barrels, which should mean physical markets strengthen and flat prices should follow.” 

Reuters