Oil slips on rising US supply as US crude inventories rise

London — Oil prices slipped on Wednesday, pulled down by a rise in US inventories and hopes that new investment could halt a plunge in Venezuela’s output.

Benchmark Brent crude oil was down 20c at $75.75 a barrel by 7.50am GMT. US light crude was 10c lower at $68.43 a barrel.

US crude inventories rose by 38,000 barrels to 405.7-million barrels in the week to August 24, the American Petroleum Institute (API) said on Tuesday. “The API reported surprisingly flat numbers to a market expecting a reasonable draw in crude and a build in products,” said Sukrit Vijayakar, director of oil consultancy Trifecta.

Official US fuel inventory and crude production data will be published later on Wednesday by the Energy Information Administration (EIA).

Traders said reports of potential investment in Venezuela’s struggling oil production also affected markets. Venezuelan crude exports have halved since 2016 to below 1-million barrels per day (bpd).

To stem tumbling output, Venezuelan state-run oil firm PDVSA said on Tuesday it had signed a $430m investment agreement to increase production by 640,000 bpd at 14 oil fields, although some analysts doubted whether this investment would go through given the instability in the country.

Despite the risk of disruption, especially from oil cartel Opec-countries such as Venezuela, Iran, Libya and Nigeria, Bank of America Merrill Lynch said global supply could climb towards the end of the year.

“Heading into the fourth quarter of 2018, we expect rising non-Opec oil production as supply outages abate and greenfield projects ramp up,” the US bank said. “Non-Opec supply outages are at a 15-month high of 730,000 bpd. However, nearly half these volumes are in the process of being restored.”

Adding to that will be new production in Canada, Brazil and the US, which the bank said “should provide a substantial boost to non-Opec supplies” during the second half of the year “taming upside pressures on Brent crude oil prices”.

Despite prospects of rising supplies, traders said crude markets remained relatively tight, largely because of the prospect of US sanctions against Iran, which will start to target its oil industry from November.

Bowing to pressure from Washington, many crude buyers have already reduced orders from Iran, Opec’s third-biggest producer. Although Tehran is offering steep discounts, Iran’s August crude oil and condensate loadings are estimated at 2.06-million bpd, compared to a peak of 3.09-million bpd in April, trade flows data on Thomson Reuters Eikon showed.

Reuters